Auckland Airport says it will lower the fees it charges airlines by NZ$33 million over the next three years following a report from the New Zealand Commerce Commission that found the airport’s target rate of return was unjustified.
The reduced charges for the use of facilities such as the airfield and terminals reflected Auckland Airport’s lower target return of 6.62 per cent, compared with 6.99 per cent previously.
The Commerce Commission report, published in November 2018, stated the benchmark for an airport’s return on capital targeted by airports for payment to shareholders is a midpoint of 6.41 per cent.
Further, the report estimated Auckland Airport’s higher return resulted in an additional NZ$37 million in after tax profit over a five-year period to June 30 2022. This was equivalent to an average of 50 New Zealand cents per person per flight.
Over the five-year period, the commission found Auckland Airport’s charges represented NZ$6.57 per domestic passenger and NZ$23.50 per international passengers.
After considering the report, Auckland Airport announced on February 22 it would reduce the charges to airlines to reflect its lower target return.
The lower charges would be offered through discounts and passenger charges from July 1 2019 until to the end of the current five-year pricing agreement on June 30 2022.
The schedule of discounted charges showed the international passenger charge will drop to NZ$14.91 in 2020, compared with from NZ$15.54 previously. Similarly, the international charge per arriving and departing passengers falls to NZ$15.21 in 2021, from NZ$15.85 and to NZ$16.15 in 2022, from to NZ$15.49.
Meanwhile, the domestic passenger charge drops to NZ2.32 in 2020, from NZ$2.73 before the discount was applied. The domestic charge per arriving and departing passenger reduces to NZ$2.86 in 2021, from NZNZ$2.98, and to NZ$3.10 in 2022, from NZ$3.23.
Takeoff and landing charges, which were dependent on the weight of the aircraft, were also discounted under the new schedule of charges.
While the target return was still above the Commerce Commission’s midpoint, Auckland Airport chief executive Adrian Littlewood said pricing needed to provide for the future and address business risks specific to the airport.
This included Auckland Airport’s multi-billion dollar 30-year infrastructure program, which presently has NZ$2 billion of projects in tow as part of its “Airport of the Future” program that features terminal and airfield expansion, new roads and utilities.