Auckland Airport under fire

Auckland Airport is accused of taking excessive profits. Photo: Reuters
Auckland Airport is accused of taking excessive profits. Photo: Reuters
Auckland Airport has been accused of targeting excessive profits by Airlines for Australia and New Zealand.

In its submission to the Commerce Commission’s review of Auckland International Airport’s pricing decisions and expected performance, the organisation (A4ANZ) said more must be done to protect airport users from the market power exerted by monopoly airports.

A4ANZ chairman Prof Graeme Samuel said the estimated value of excess returns to Auckland Airport owners might be upwards of $3.6 billion, in 2017 dollars.

Based on both historic financial performance, and the recent decision of Auckland Airport to target returns above the Commerce Commission’s midpoint weighted average cost of capital (wacc), A4ANZ did not believe the airport was "appropriately constrained’’ in its ability to extract excessive profits during the 2017-22 pricing period, he said.

A4ANZ chief executive Alison Roberts said there was a reason financial analysts regarded Auckland Airport so positively.

"The Airports Association claim the airport’s profit is ‘fair and reasonable’ sits in stark contrast to the facts.

"Auckland Airport has the second-highest margin of all analysed international airports — second only to Sydney Airport which is also under a light-handed monitoring regime.’’

A4ANZ’s submission also outlined airline concerns regarding Auckland Airport’s proposed runway land charge and forecast operating expenditure and efficient investment.

The organisation encouraged the Commerce Commission to take a broader view to consider quality, efficiency and innovation.

Prof Samuel said the commission’s draft report reinforced his long-held view monopolies needed to be held to account by a credible threat of regulatory invervention.

New Zealand needed a regulatory framework driving airport-airline negotiations to produce better outcomes for consumers, through improved efficiency in the allocation of resources and targeted investment.

It has been a bad few days for Auckland Airport, as it came under criticism from passengers and airlines alike.

Singapore Airlines regional vice-president for the south west Pacific Philip Goh said arriving at Auckland Airport could be a big let-down for passengers after enjoying comfort in the air.

And a group representing all airlines operating here said it was "absolutely frustrated’’ at the quality of service at the airport.

Mr Goh said his company was investing close to $2 billion on upgrading cabins throughout its fleet but airports around this region could be a disappointment, NZME reported.

"For us, the entire journey for the customer is important. We put lots of resources and funds on making sure our products are very good in the air but on the ground, unfortunately, they come up short.’’

Auckland Airport  hit back at criticism of its facilities but did say growth has taken it by surprise.

The Board of Airline Representatives said airlines worked hard to give their customers a high quality experience.

"When it starts and ends with queues and expensive bills for parking and food at the airport, this clearly dampens the holiday glow,’’ executive director Justin Tighe-Umbers said.

"For the most important tourist gateway to the country, airlines expect their passengers to have a high-quality experience at the airport, and as it is increasingly clear to the travelling public, they are getting substandard service.’’

Airlines and passengers paid more than $300 million a year for facilities at the airport and they were not getting the standard of service they were paying for.

Auckland Airport’s chief executive, Adrian Littlewood, said it took 48 years to get to 15 million passengers and only another four years to reach 20 million passengers.

During the five years to 2017 the company spent 80% more than forecast on new infrastructure.

Last year, it announced a plan to spend almost $2 billion in new airport infrastructure over the next five years, he said.

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