New aeronautical charges for airline customers

Auckland Airport announces new aeronautical charges for airline customers

Auckland International Airport Limited (AIAL) has announced revised aeronautical pricing levels for the next five years.

Landing charges for airlines are to increase by 2.5% per year for the next five years coming into effect on 1 September 2007. The last increase in landing charges occurred six years ago in September 2001.

The Airport Development Charge (ADC) will remain the same at $25 (inclusive of GST) per departing international passenger 12 years and over until 1 July next year. The ADC will be renamed the “Passenger Service Charge” (PSC) and will be levied on the airlines. This will remove the need for passengers to pay the ADC at the airport, bringing the approach into line with almost all other international airports around the world.

From 1 July 2008, the PSC will be split between departing and arriving passengers and will increase 50 cents (per international departure and arrival) each year for three years. As currently applies, there will be no charge for children under 12 years of age.

The first increase in the PSC will coincide with the opening of the new expanded arrivals facility and new pier at the international terminal, which together are expected to cost approximately $125 million.

AIAL’s chief executive, Don Huse, said: “We have had three years of positive and constructive discussions with our airline customers. The modest increases announced today are broadly in line with inflation. We believe these prices are very fair and reasonable, particularly given the significant investment programme over the last five years and the proposed investment programme over the next five year period.”

AIAL’s General Manager, Aeronautical, Tony Gollin, who has led the consultation process, said: “The process was open, thorough and professional and throughout we have remained focused on our joint responsibility to the travelling public.”

“The change in the collection of the PSC will bring our approach into line with that of international airport best practice and will make life a whole lot easier for departing passengers.”

“We have made quite a number of significant concessions in endeavouring to reach agreement with our airline customers. We have also acknowledged the very latest Australasian regulatory requirements in setting our new prices. We have closely followed the opportunity cost valuation approach for airfield land recommended by the Commerce Commission.

“We have also placed a moratorium on asset revaluations for aeronautical pricing purposes until 2017. We believe our prices are very reasonable when compared to charges at comparable airports in Australasia and around the World.”

Mr Gollin said the company had made significant compromises in the current round which provided a workable foundation for the future. A set of principles had been developed that could be used for future price-setting processes. He noted that an independent peer review by an international economic consulting company has endorsed AIAL’s approach.

Directly comparing, or benchmarking, AIAL’s aeronautical charges using authoritative independent industry data shows that Auckland compares favourably with its closest counterpart, Sydney, as well as other airports in Australasia and worldwide.

Mr Gollin said, “The increase in charges is in line with inflation and represents a good deal all round. For international passengers the rise in the airport development charge from July 2008 is equivalent to the cost of two postage stamps.”

“Our ongoing and extensive investment in new facilities for passengers is providing a world class, value-for-money destination.”

Since prices were last set, AIAL has upgraded and expanded significant parts of the airfield and terminal buildings to ensure it can meet the anticipated growth in visitor numbers coming to New Zealand.

AIAL is entering the final year of a four-year, $500 million capital expenditure programme. Already completed are:

 The new upper level on the international terminal ($47m)
 New hold stow baggage screening ($29m)
 Rehabilitation/widening of the main runway ($37m over four years)
 New hard stands for parking aircraft ($28m)

Other projects under way include terminal upgrades and expansion, the new A380-capable Pier B ($40m) and the new northern runway, which is scheduled to be operational in 2010 or 2011, and will free up capacity on the main southern runway.

The joint AIAL and Air New Zealand domestic terminal renovation, where the national carrier is contributing $13m of the $42m cost, is a significant upgrade in its final phase. The renovation is scheduled for completion in December.

An expanded arrivals area in the international terminal ($85m over two years) is also under way. It will connect to the new Pier B, provide significantly more space for border checks and reduce peak time delays. The project will also allow AIAL to develop an enhanced arrivals duty-free retail facility.

“AIAL welcomes more than 70 per cent of New Zealand’s international visitors and together with our airline customers we make a significant economic contribution to our country’s reputation as a premier tourism destination,” said Mr Gollin.

“To maintain this position, we must continue to invest in our facilities. A fair pricing regime and a stable regulatory environment are crucial in this regard.”

In commenting on future investment, Mr Huse said, “The Government and border agencies have indicated a strong interest in completing the next stage of the arrivals expansion of the international terminal before the Rugby World Cup in 2011.”

“We had planned to have it completed in 2012 or 2013, but we are giving Government’s representations serious consideration.”

“This project has an estimated cost of $150m spread over two and a half years. No final decision on this project has been made and the prices announced today do not reflect this project being completed on the earlier timetable. AIAL is continuing to consult with the airlines with respect to this project,” said Mr Huse.

Mr Huse said, “AIAL is now in a position based on the excellent platform established in this three year process, to develop a detailed framework for future pricing negotiations.”

ENDS

See... Schedule of Charges (PDF)

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