Calls to scrap Airport Development Charge

Media Release
3 July 2007

Calls to scrap Airport Development Charge

Air New Zealand said today the Airport Development Charge paid by passengers departing Auckland should be scrapped rather than disguised by the monopoly airport operator.

Auckland International Airport Limited said yesterday that it was increasing the Airport Development Charge (ADC) from 1 July 2008 and renaming it a “Passenger Service Charge” that would be directly levied on the airlines.

Air New Zealand CFO Rob McDonald said today there was already a misconception that the ADC was being scrapped by AIAL.

“The collection of the fee is simply being transferred to the airlines, without their agreement. So instead of punching a credit card into a machine at the airport to get your departure sticker, the fee will be collected by the airline on behalf of AIAL when you book your fare.”

While not having to pay the fee at the airport would streamline a frustrating process for the travelling public, the real issue was why the charge existed at all, Mr McDonald said.

“It’s clear from the excessive profits enjoyed by AIAL as a monopoly operator that the ADC isn’t necessary to support infrastructure development. In renaming the ADC, AIAL appears to be acknowledging that, despite its name, the ADC has not been separately applied to the development of airport facilities.”

Mr McDonald said that the $60 million in ADC charges collected annually from international passengers leaving Auckland, which must be paid to the AIAL, would inevitably now find its way into airfares.

“We will have to seek the recover the fee from our customers, so instead of paying it as a separate charge, the levy will become a component of the airfare. Airfares are highly competitive and driven by market demand, but the imposition of such a significant levy by a third party will inevitably skew prices.”

Mr McDonald that all charges of this nature had the direct effect of making
New Zealand more expensive as a tourist destination, at a time when inbound tourism was struggling with the record strength of the New Zealand dollar.

“AIAL’s approach is completely misaligned with the drive for incremental growth in the number of international tourists to New Zealand,” he said.

Air New Zealand will be reviewing its options in light of the AIAL’s announcement.

Mr McDonald said Air New Zealand will this week table a substantial response to the Minister of Commerce’s review of regulatory control provisions in the Commerce Act.

“We have a range of perspectives on the lack of regulation that exists to protect
the travelling public from monopoly abuse, and look forward to sharing these with officials as they work through the review process.”

ENDS

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