'Monopolist' pricing slammed by airlines

By DANIEL RIORDAN

Airlines are up in arms over Auckland Airport's plans to raise its landing charges by a cumulative 19 per cent over the next three years.

The decision follows 10 months of often heated debate between the parties.

Yesterday , the airport said it would increase its charges by 8.5 per cent from September, with further increases of 5 per cent in each of the following two years.

The Board of Airline Representatives in New Zealand (BARNZ) has been negotiating the charges with the airport on behalf of the 26 airlines which use Auckland, either directly or in code-sharing agreements.

BARNZ executive director Stewart Milne said Auckland was already an expensive airport for airlines and passengers in comparison with other Australasian airports.

"To further increase landing and passenger charges smacks of pure monopolist behaviour."

Mr Milne said the airlines believed charges should be reduced rather than increased.

He cited an ongoing Commerce Commission study into airport pricing which he expected to put the spotlight on "the monopolistic approach which Auckland Airport has used."

Mr Milne said the increases would have a major adverse impact on aviation, tourism, business travel and the wider economy.

Coincidentally, BARNZ holds its annual meeting today . What action the airlines will take is likely to be top of general business.

Unresolved agreements have gone all the way to the High Court. In 1992 and 1993 Air New Zealand, Qantas and Ansett NZ took Wellington International Airport to the High Court and lost.

Auckland airport managing director John Goulter said the increase was justified in light of the need to maintain international standards. The airport is two years into a five-year $140 million capital expenditure programme involving the total rehabilitation of its runway, taxiways and aprons.

In reaching its decision, Mr Goulter said the company had tried to balance the interests of shareholders, airline customers, overseas visitors, the travelling public and the region as a whole.

Auckland last reviewed its charges in 1996 when they were reduced by 3 per cent. This followed a 3 per cent rise in 1992.

The latest review is the first under the Airport Authorities Amendment Act, which requires the airport to consult airlines before a decision.

The charges are based on an airline's return on assets and applied to airlines depending on the weight of their aircraft and their number of seats.

While the airport must consult airlines in setting the charges, it has the final say.

The airlines are upset at the way the airport revalued its assets to set the charges.

The cumulative increase is understood to be far less than what the airport was looking for when consultations began late last year. One source said the airport's penultimate formal proposal was for a cumulative 30 per cent, while another said earlier proposals were closer to 50 per cent.

If the airlines pass the costs on, they will affect freight as well as passengers.

Figures from the International Air Transport Association indicate landing fees comprise about 5 per cent of airline costs. On that basis, an 8.5 per cent increase in landing charges, if passed on completely, should raise prices to airline customers by half a per cent.

Ansett NZ, Air NZ and Qantas last night had no comment.

Auckland Airport's revenue from landing charges was $44.5 million in the last reported financial year (to June 1999), 28 per cent of its total revenue of $160.4 million.

Increasing those charges by 8.5 per cent will bring in an extra $3.8 million.

The airport has also raised its international passenger departure fee from $20 to $22, effective from October.