Arbitrator sides with airport in fees battle

An arbitrator looking into proposed fee increases at Wellington International Airport has backed the airport's valuation method, majority owner Infratil said yesterday.

The airport has been negotiating with its airline customers to increase prices after their five-year agreement expired in July and airlines agreed to a 10 per cent interim increase.

The arbitrator, former High Court judge Sir Ian Barker, has confirmed that the airport can keep valuing its assets the same way. But this had not, said one source, given the company carte blanche to charge monopoly prices for using its airport.

A report in August from the Commerce Commission into charges by New Zealand airports found Wellington airport was making excessive profits, although not enough to warrant price controls.

The commission ruled that airports should be valued on historic cost rather than the cost of replacement. The airports disputed this.

Arbitration between Wellington Airport and its two main customers, Air New Zealand and Qantas, was not part of the Commerce Commission process.

Confidentiality agreements have stopped the airlines commenting.

"[Wellington airport's] methodologies have now been upheld by the arbitrator for use in setting charges," Infratil said in a statement to the New Zealand Stock Exchange.

" ... it is hoped that consultation on the remaining issues can be completed in the near future and final charges fixed."

The airport has not said what increases it is seeking for services such as runway maintenance, emergency services and air-traffic control. Sources say rises of up to 80 per cent were sought.

The Government hopes to decide by Christmas whether to act on the Commerce Commission's recommendations, which include controls on Auckland International Airport.

Wellington International Airport said it had also pointed out to the Commerce Minister a $16.5 million numerical error in the commission's calculations, which significantly affected the conclusions.