Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

UDPATE: Wellington Airport says regulator's report flawed

UDPATE: Wellington Airport says regulator's report flawed

By Paul McBeth

Feb. 8 (BusinessDesk) - Wellington International Airport, which is co-owned by Infratil and Wellington City Council, denies it's extracting excessive profits and says the Commerce Commission has used a flawed model in assessing the transport hub's returns.

The airport's effective rate of return is 8.1 percent, within the regulator's tolerance and has cheaper passenger landing charges than Auckland and Christchurch at $11.39 a head, it said in a statement.

The regulator's claim that the airport is likely to recover between $38 million and $69 million more than it needs to for a reasonable return between 2012 and 2017, was wrong because it overestimated future returns and excluded commercial concessions to airlines, it said.

The commission thinks a reasonable return is 7.1 percent to 8 percent, whereas the airport is projected to make returns of between 12.3 percent and 15.2 percent, it said in a final report to Commerce Minister Craig Foss and Transport Minister Gerry Brownlee on the airport's information disclosure.

Wellington Airport needs a stable regulatory environment to support investment of some $100 million over the next few years to maintain its current standards and meet growth targets.

"We are confident the ministers will recognise the investment that is required to accommodate growth for Wellington Airport and that on Australasian and world benchmarks its airport charges are in the low range," chief executive Steve Sanderson said.

The regulator is required to report to the ministers as soon as possible after an airport, as a regulated monopoly, sets new prices. The final report was delayed from a late December date after the draft determination was published in November.

The airport is challenging the regulator's input methodologies, which may prompt a rethink, the commission said.

The review doesn't make any recommendations on what regulation should apply to Wellington airport, as that's outside the scope required by law.

Commission deputy chair Sue Begg said Wellington Airport's excessive profits were "largely attributable to Wellington airport valuing its land higher than we think it should, and Wellington airport targeting a higher return than appropriate for its circumstances," and that "the regime has not been effective in limiting Wellington airport's ability to extract excessive profits."

Wellington Airport has previously been accused of price gouging in the setting of its air service charges, with national carrier Air New Zealand flagging a $200 million lift in landing fees over the coming five years.

The review found Wellington Airport has improved its service quality and how it structures its prices, and said there was an appropriate level of innovation at the gateway.

The information disclosure regime couldn't measure the efficiency of its operational expenditure, and needed a longer timeframe in looking at the effectiveness of the airport's investment.

Shares of Infratil fell 0.8 percent to $2.41.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Fund For PPP Plans: Govt Embraces Targeted Rates To Spur Urban Infrastructure

The government's latest response to the Auckland housing shortage will see central government and private sector firms invest in 'special purpose vehicles' to fund essential roading, water and drains that Auckland Council can't fund without threatening its credit rating. More>>

ALSO:

Superu Report: Land Regulation Drives Auckland House Prices

Land use regulation is responsible for up to 56 per cent of the cost of an average house in Auckland according to a new research report quantifying the impact of land use regulations, Finance Minister Steven Joyce says. More>>

ALSO:

Fletcher Whittled: Fletcher Dumps Adamson In Face Of Dissatisfaction

Fletcher Building has taken the unusual step of dumping its chief executive, Mark Adamson, as the company slashed its full-year earnings guidance and flagged an impairment against Australian assets. More>>

ALSO:

No More Dog Docking: New Animal Welfare Regulations Progressed

“These 46 regulations include stock transport, farm husbandry, companion and working animals, pigs, layer hens and the way animals are accounted for in research, testing and teaching.” More>>

ALSO:

Employment: Most Kiwifruit Contractors Breaking Law

A Labour Inspectorate operation targeting the kiwifruit industry in Bay of Plenty has found the majority of labour hire contractors are breaching their obligations as employers. More>>

ALSO: