15 December 2004

50/50 split for passenger clearance costs

The funding of passenger clearance services at New Zealand’s seven international airports will be split around 50/50 with the government contributing $55 million and industry contributing $49 million annually.

Announcing the decision today, Finance Minister Michael Cullen said the funding package had been developed after extensive consultations with key users and stakeholders and had won broad support although there were some areas of disagreement.

Raised security concerns and increasing passenger numbers had created pressure for more intensive and more efficient screening techniques which were expected to raise the cost from $55 million a year to $91 million and to raise industry’s costs by another $14 million a year.

“This addition in costs created the opportunity to review the whole funding system as it is inconsistent and ad hoc in nature with the government recovering some costs but not others and with the systems of cost recovery differing in both purpose and application between the different agencies.

“We have adopted a “primary beneficiary model” in which the costs are allocated according to where the principal benefit is derived,” Dr Cullen said.

“The small modification to this rule is that the government will heavily subsidise rather than fully fund biosecurity and customs services at the regional airports [Hamilton, Palmerston North, Dunedin and Queenstown] where the processing costs per passenger are significantly higher than at the larger metropolitan centres.

“The small user pays element is designed to send a pricing signal to the travelling public and will be charged to the airlines in the first instance but passed on to passengers through ticket prices,” Dr Cullen said.

Specific decisions are:

That the full cost of aviation security be met by the airlines and passengers as the prime beneficiaries of the service; That there be further consultation with industry early next year regarding how these costs should be allocated across airports; That the government fully fund current biosecurity and customs services at the metropolitan airports [Auckland, Wellington and Christchurch] and fund them at the regional international airports up to the per passenger rate of the third cheapest metropolitan airport and on a dollar for dollar ratio beyond that; That a cap be put on the industry’s contribution at regional airports equivalent to the per passenger rate of the second most expensive regional airport with the government meeting all costs above that level; That any new airport meet the full costs of government services.

ENDS

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