Air NZ vs Auckland Airport

Radio NZ report:

Air New Zealand and Auckland Airport are continuing to trade accusations over a planned increase to the airport’s charges.

The same issue came to light last year, when some airlines claimed travel would become unaffordable as the airport announced a five-year plan to help fund its multibillion-dollar redevelopment plans.

Air New Zealand chief executive Greg Foran said based on “information that we receive from them [the airport] and we can see in the public arena”, the airport’s regulated charges would add about $46 to the price of a domestic ticket by 2032.

An extra $46 per ticket is very significant. As some tickets are under $100, that could increase fares by 50%.

Airports are regulated by the Commerce Commission as they are near natural monopolies. But the maximum price they can charge airlines tends to be a percentage of their asset base. So it provides airports with an incentive to spend up large, as this will allow them to increase landing fees to airlines.

In an ideal world you might have more than one airport in a city, as competition is the best answer. But this is very unlikely in NZ, as most cities do not have the space for a second airport.

The next best options seems to be having the Commerce Commission change the basis of its price regulation, so that it doesn’t provide an incentive for massive capital expenditure beyond that which is necessary for an efficient and pleasant airport.

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