IATA calls for changes to NZ Economic Regulatory Framework for Airports

The International Air Transport Association (IATA) called for urgent changes to New Zealand’s Economic Regulatory Framework for Airports. 

IATA’s call comes in the wake of the recent publication of the New Zealand Commerce Commission’s review of Auckland Airport’s Price Setting Event 4.

IATA’s ad interim regional vice-president for North Asia and the Asia Pacific Dr Xie Xingquan said: “It is not surprising that the Commerce Commission has concluded that Auckland Airport’s charges are excessive in the range of NZ$150 million to NZ$226 million. While the airport has responded by lowering its charges over the next two years in response to the review, the process does highlight that the economic regulatory framework in its current form is not fit-for-purpose and change is urgently needed.”

Concerns to take into consideration

IATA pointed out that the current light-touch regulatory approach means Auckland Airport can set the aeronautical pricing as they wish. 

Auckland Airport, being the sole monopoly provider, can game the regulatory process by setting their 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.

While Auckland Airport is investing significantly in infrastructure, there are outstanding concerns highlighted by airlines about the size, phasing, cost allocation and affordability of these major investments. 

Experts note that some of these costs could have been avoided if infrastructure planning and investments had been managed appropriately in the past.

Also, non-aeronautical activities, which generally draw much higher returns, are excluded from the purview of the Commerce Commission.

According to Xie: “Aviation is a key economic sector for New Zealand, supporting 5.6 percent of the country’s GDP and 177,000 jobs. The delivery of demand driven, functional and cost-effective infrastructure will support the continued development of New Zealand’s aviation sector. The current consultation process with Auckland Airport is ineffective and may not deliver outcomes that are in the best interests of passengers. This needs to change.”