Airport strikes back on controls

By SIMON HENDERY

Auckland Airport broke its silence on the Commerce Commission report into airport price controls yesterday, saying the findings could hinder economic development.

The airport's share price has dropped 8 per cent since the commission released its draft report on Tuesday recommending price controls be put on the company's airfield activities.

The report said Auckland had overvalued its airfield asset base, which feeds through into its landing charges, by 68 per cent.

If adopted, the report's recommendations could cost the airport $16 million in income over three years.

Wellington and Christchurch airports' airfield assets were also overvalued, the report said, although the competition watchdog has not recommended controls for those businesses.

Auckland Airport managing director John Goulter said yesterday that the commission's report had come as a "complete surprise."

The airport has until August 10 to respond.

Mr Goulter said it would be "making forceful and comprehensive submissions."

After public hearings in September, a final report will be presented to Commerce Minister Paul Swain on November 2.

Mr Goulter said he was mystified by the commission's valuation of the airport's assets, which was based on a historical cost methodology.

This differed from the accepted optimised depreciated replacement cost methodology usually applied to the infrastructure industry.

"You may well find that other utility infrastructure groups now also deem it necessary to make submissions [on the report]."

The report, prepared with advice from University of Victoria economics lecturer Martin Lally, also suggested that Auckland Airport sell land earmarked for a second runway, due to be built about 2007, which is now leased out as farmland.

Mr Goulter said the idea of selling the land and then buying it back when needed was "intriguing."

"This is the second-largest port in New Zealand by value. If you are starting to interfere with the long-term economic development of New Zealand, I think that is somewhat of a surprise."

Auckland Airport shares closed down 1c yesterday at $3.50.