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Final section 56G report on Wellington Airport

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Final section 56G report on Wellington Airport

Postby Share Investor » February 8th, 2013, 9:30 am

Friday 8 February 2013

Wellington Airport questions Commission’s report

Wellington Airport is questioning some of the conclusions of the final Commerce
Commission report issued today on its airport charges.

Wellington Airport Chief Executive Steve Sanderson welcomed the report’s findings
that the airport conducted a transparent and consultative approach to price setting,
promoted innovation and operational efficiency, and delivered a quality passenger
experience with prudent capital investment.

However, Mr Sanderson questioned the Commerce Commission’s findings on the
airport’s forecast future returns.

“Wellington Airport’s effective rate of return is 8.1% which is in the range the
Commerce Commission considers as reasonable,” Mr Sanderson said.

“The Commerce Commission’s theoretical model, which looks at future pricing over
the next five years and not actual returns, doesn’t apply to the airport. The
Commission’s forecast return excludes commercial concessions that benefit the
airlines. This means the report has overestimated the airport’s returns in the future –
the current charges are below the regulatory benchmark,” Mr Sanderson said.
Wellington’s charges are between those charged by Auckland and Christchurch
airports, and in the lower range of Australasian airports in terms of cost per
passenger. The current average per passenger landing charge at Wellington is
$11.39 and it is forecast to only increase by around 70 cents per year.

“New Zealand’s airport prices are low when compared with airports worldwide with
good investment and innovation further demonstrating that the market is functioning
well,” said Mr Sanderson.

“Wellington Airport provides strong incentives to support travel and tourism growth
and the introduction of new air services, which is evident in the strong growth we
have seen in the last year,” Mr Sanderson said.

The report’s positive findings about the airport’s transparency and consultative
approach to price setting further demonstrated that the current regime was working.
This view was reinforced by the report’s postive benchmarking of airport service
quality and innovation, Mr Sanderson said.“Over the last fifteen years Wellington Airport has invested $300 million in its
capacity and service quality. Forecasts indicate around $100 million will need to be
invested over the next few years to maintain the current standards, accommodate
growth, safety requirements and air service connections. The investment decisions,
both past and future, depend on an appropriate regulatory environment which has
been the case to date.”

“We are confident the Ministers will recognise the investment that is required to
accommodate growth for Wellington Airport and that on Australasian and World
benchmarks its airport charges are in the low range.”

Mr Sanderson also noted that report supported the airport’s pricing structure in
promoting operational efficiency.

Wellington Airport is also the most cost efficient in Australasia and undertakes
disciplined, well managed, innovative investment in airport infrastructure, Mr
Sanderson said.

“We look to accommodate expected long term increases in demand by making better
use of existing facilities, before looking to expand. The dual use international
terminal and swing gates are examples of this,” Mr Sanderson said.
Notes for journalists and editors

The Commission’s report is on the effectiveness of the information disclosure regime
for the setting of charges at Wellington Airport. The regulatory regime requires that
Auckland, Wellington and Christchurch airports make public specified financial,
quality and pricing information to ensure transparency when consulting on and
setting airport landing charges. The aim is to ensure that the airports have similar
incentives and pressures to suppliers operating in competitive markets.

Wellington Airport was the first airport to have been reviewed following it consulted
with airlines about setting airline prices under the Airport Authorities Act last year.
This is also the first completed report in an overall assessment of the information
disclosure regime for New Zealand’s three main airports. The report for Auckland is
due around June and Christchurch’s by the end of the year.

The Airport Authorities Act provides a legal framework for the airport to set sufficient
price levels to operate the Airport and provide a fair return on the funds invested to
Infratil’s 16,000, mainly New Zealand, shareholders and Wellington City ratepayers.
The Airport Authorities Act legislation was retained in Parliament’s recent
consideration of the Commerce Act and support by Treasury and the MED in the
2007 reviews of the proposed airport regulation at that time.

Enquiries to
Greg Thomas
Wellington Airport021 430 435
[email protected]
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