Auckland Airport prices set to rise

Auckland Airport prices set to rise

  • AIAL has announced to the market its updated landing charges today. Charges will rise significantly over the price period to FY27. International and domestic trunk passenger charges will at least double, and regional passenger charges will increase by more than 140% over the period. As these charges are applied, BARNZ expects demand for air travel be impacted by rising costs.
  • AIAL has advised the market that capital expenditure which will be recovered in prices to FY27 will be 2.5 billion dollars. This is the cost that generates the price rises announced today.
  • Over the ten-year period AIAL expect to see capital expenditure as recovered from charges of some 6 billion dollars – so it is likely passenger charges will rise further again, as AIAL continues its hugely expensive delayed building programme.
  • BARNZ agrees that investment in AIAL terminal infrastructure is urgently needed. Unfortunately, the entire aviation system will need to pay for the high cost of delayed investment. As plans for development have sat in draft, the price of this development has skyrocketed – as has the target return.
  • AIAL tell us they intend to target a return of 73%. Shareholders in AIAL might well see this as good news, but it remains to be seen whether the Commerce Commission will accept this WACC (Weighted Average Cost of Capital) which relies on inputs arising from the Input Methodology review. In freezing prices for the first year of this period, AIAL committed to striking its WACC as if it had been struck as at 1 July 2022. As a comparator, the Commerce Commission’s mid-point WACC for airports as at 1 July 2022 was set at 7.24%
  • The adverse impact on demand for travel will be significant. Our analysis tells us that this will be felt especially on travel to the South Island, hurting families and students who need to travel, tourism businesses and even other airports around New Zealand. There is real cause for concern.
  • Ultimately, AIAL knows it is enabled by legislation – able to set prices as it sees fit. AIAL does not have to listen to its customers, evidenced by announcements of capital costs which drive these prices during the ‘consultation’ period.
  • Airlines want the airport to be a great place to travel from. The regulatory regime for airports was created to monitor sustainable airport investment. This is not the right oversight for hugely expensive capital investment that has been delivered too late. Travellers of the next ten years will pay the price of delay, while shareholders of AIAL have banked all the returns.
  • BARNZ calls on the Commerce Commission and the Ministry of Transport to do all they can to ensure the regime is changed. We should no longer allow a regulatory regime which incentivises the airport’s commercial returns while leaving travellers with crumbling infrastructure – and now we await a price shock.

 

For media enquiries, please contact: Cath O’Brien, Executive Director, BARNZ

M: +64 21 730 557