Airport won't take controls lying down

By Phil Boeyen, ShareChat Business News Editor

Friday 6th July 2001

Auckland Airport (NZSE: AIA) has gone on the offensive over the possible introduction of price controls on its airfield activities.

Earlier this week the Commerce Commission recommended price controls at the airport in a draft report, but did not propose controls for either Wellington or Christchurch airports.

AIA boss John Goulter says the recommendation has taken the company by surprise.

"It would also have come as a total surprise to the investment markets as evidenced by the 8% fall in the company's share price."

In particular the company is taking issue with two key areas that it claims have had a significant impact on the Commission's views.

The first relates to earning a return from land held for future runway and airfield expansion.

In the report the Commission says that while land acquired or held to provide airfield activities in the future is included within the statutory definition of airfield activities, it does not follow that it is required to be included in the asset base for determining today's prices of airfield activities.

"The Commission considers that a return should generally not be sought from airfield users on any land held for the development of airfield activities - that is, until it is "used or useful". For this reason, land held for the development of airfield activities has been optimised out."

Mr Goulter says the Commission has stated that the company has an option either of divesting the land held for the second runway and returning the funds to shareholders or finding alternative, more productive, uses for it.

But he claims the company may need the land for the runway in around six years' time.

"If the company is forced to divest this asset due to an inability to achieve a return on it, then this would seriously affect the company's ability to deliver the necessary infrastructure when required and would inevitably increase the cost in the event of the later repurchase of the land involved."

Another point that the airport says is "totally mystifying" is the Commission's take on valuing runways, taxiways and apron assets.

The Commission is advocating an historical cost basis, but the airport claims that method is inconsistent with the optimised depreciated replacement cost, which is accepted for use within other regulated New Zealand infrastructure industries.

The airport is also taking the Commission to task over its suggestion that lower airfield charges "would eventually go to passengers at least in part."

Mr Goulter says Statistics New Zealand survey international airfares on an ongoing basis and the fares show considerable movements, particularly over the past five years, during which time airport charges at Auckland have also been constant.

"The company will be making forceful and comprehensive submissions to the Commission on their draft report", says the airport's CEO.

Submission hearings are planned for August and the Commission hopes to make a final recommendation to the Commerce Minister on the matter in November.

Comments from our readers

No comments yet