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Regulatory control provisions of the Commerce Act

MEDIA RELEASE 22 November 2007


Regulatory control provisions of the Commerce Act

Wellington International Airport Limited (WIAL) welcomes the Government’s decision to maintain a light-handed approach to airport price regulation, but disagrees that changes to the regulatory control provisions of the Commerce Act are necessary.

The Government’s overall intention of better economic regulation is to be applauded, but whether more equates to better remains to be seen. Internationally the trend in most OECD counties is for less economic regulation, in particular as regards airports.

WIAL supports the Government’s commitment to formally recognise that “regulation should ensure firms have incentives to innovate and to invest in infrastructure.” Over the last decade, since the Government sold its 66% interest, Wellington Airport has invested over $190 million in its facilities. It has been transformed from a converted factory to a regional gateway. It has financed this investment by being very efficient and by growing its passenger services and property income.

“What ever regulatory regime emerges from this process, it must ensure that dominant airlines cannot stifle investment as they have endeavoured to do in the past and limit opportunities for competition. WIAL would not have been able to accommodate Pacific Blue’s entry to the domestic market without the investment programme it is undertaking.

“While the Airport has been in a state of continuous improvement over the last decade, future growth will require ongoing enhancement of airport facilities. There would be no prospect of expanding current services or attracting long haul services without continued investment by WIAL,” said Mike Basher, Acting WIAL CEO.

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The Government’s favouring of a consultative approach over negotiation is recognition of the merits of the current system where, under the Airport Authorities Act, airports are required to extensively consult with airlines before setting charges.

WIAL was conservative in its approach during the last period of pricing consultation with the airlines, announcing in July an increase of 2.85% per annum for the next 5 years, or around 30c per airline ticket. This modest increase was made in the context of a $100 million capital investment programme currently underway.

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