Airlines fear extortinate fee increases at Auckland International Airport

Auckland International Airport’s massive asset revaluations could be fed through to its landing and passenger charges, with airlines fearing they could face “extortionate” fee increases as a result. 

New independent valuations made public by the airport yesterday showed the airport’s assets more than doubled to $NZ2.7 billion in the past four years, the news coming as the airport prepared this week to send airlines its proposed new charges for five years, due to take effect in September 2007.

Air New Zealand, which noted that passengers “end up paying” for increased charges, called for an immediate Government review of the airport regulatory framework to “protect New Zealanders and the tourism industry from this display of greed”.

The Board of Airline Representatives of New Zealand said its members, including Air New Zealand and 23 other airlines, had a “high degree of angst” about the possible impact on airport charges, with the board estimating that total fees to airlines could rise by up to $38 million a year.

Air New Zealand chief executive Rob Fyfe described the new valuations as beyond belief saying, “Ultimately we believe grossly inflated valuations like this will be used to justify extortionate increases in airport user charges”.

The airport company’s Chief Financial Officer, Robert Sinclair, said the valuations were just one “input” into the pricing process adding, “There are a number of other considerations, such as appropriate valuation methodologies, asset optimisation and the treatment of revaluation gains, which are relevant.”

He said the issues would be considered in conjunction with the airlines and Barnz as part of continuing consultation and the value of the asset base reflected significant increase in land values and construction costs in the past four years, the increase in income generated from the assets and the airport’s capital expenditure and maintenance programme. 

A large part of the increased valuations comes from retail land the airport holds, but the airlines look at the increase in the value of “aeronautical” assets, including runways, airfield land and terminal buildings.

Barnz executive director Stewart Milne said: “By our calculations (the airport) has increased its aeronautical asset base by upwards of $300 million adding, “Under the approach previously taken by airports, a $300 million revaluation would result in airlines and passengers paying an airport more than $38 million a year extra in charges – for use of the same assets.”

He said international airlines were dismayed at the prospect of large charge increases, saying “They see New Zealand airports as already very expensive.” Barnz previously expressed concern about an 86% rise in the value of Wellington International Airport’s assets and the potential for increased fees when new charges take effect next June.

Rob McDonald, Air New Zealand’s chief financial officer, called for a Government review of the regulatory framework and said several of the country’s airports were among the world’s most profitable.

Report by The Mole