The International Air Transport Association (IATA) has weighed in on the Auckland Airport pricing debate—and is calling for urgent changes to the economic regulatory framework for New Zealand airports.
IATA regional vp for North Asia and Asia Pacific Dr Xie Xingquan says the current consultation process with AKL is ineffective and may not deliver outcomes that are in the best interests of passengers. His comment follows the New Zealand Commerce Commission’s review of Auckland Airport’s Price Setting Event 4, which labelled the airport’s charges as excessive, and saw the airport reduce its charges. IATA claims that AKL, as a monopoly provider, can game the regulatory process by setting pricing artificially high at the start of the regulatory process, and then respond, if they so wish, by lowering their pricing following the conclusion by the regulator or to ignore the report. “This needs to change,” says Xingquan. The airline association has also mentioned AKL’s current infrastructure improvements, noting airline concerns about the size, phasing, cost allocation and affordability of the projects. Some of these costs, says IATA, could have been avoided if infrastructure planning and investments had been managed appropriately in the past.
. . . AKL Responds
AKL has responded to IATA’s comment—and has highlighted that the Commerce Commission was ‘pleased’ with how AKL responded to its report, which was the culmination of 18 months of research into the matter.
AKL also claims that the airport company is not the reason for increasing airfare prices, and says like all New Zealand’s major airports, the airport is regulated. “In stark contrast, we have one of the least competitive domestic airline markets in the world (84% of the market is controlled by a single airline), second only to Bolivia, and a monopoly airline that is subject to zero economic regulation,” says an AKL spokesman. “We think that deserves a look.” Airports, says AKL, cannot charge what they like, as IATA claims, ‘however airlines in New Zealand can’. “We are currently seeing year-on-year increases across the board on domestic fares but it’s on monopoly routes where it’s most noticeable.”
AKL says data shows domestic airfares for travel in the coming months is up 8% year-on-year, ‘but the rate of airfare increase is twice as much on monopoly domestic air routes at 17%.’ The airport regulatory regime is designed by the Commerce Commission, says AKL. “[the framework] deliberately separates aeronautical and non-aeronautical activities, so that airlines pay for the assets they use, and commercial operators pay for what they use to run their businesses. It quite rightly ensures natural monopoly assets like the runway are regulated, and those that exist in a competitive market are not.”
