Passenger clearance costs to be evenly shared

Passenger clearance service costs at New Zealand’s seven international airports will be split around 50:50 between the government and industry and equally among passengers, according to a funding formula agreed by Cabinet this week.

Announcing the decision, Finance Minister Michael Cullen said the government had consulted widely among stakeholders and had listened carefully to all the views presented.

“I am confident the solution we have decided upon is the fairest available and will be the most enduring and the simplest to administer,” he said.

The cost allocation review, begun in May last year, was prompted by a significant increase in both government’s and industry’s costs – estimated now to reach around $105 million a year in total – as rising security concerns post September 11 and increasing passenger numbers created pressure for more intensive and efficient screening techniques.

Dr Cullen said it had been agreed in December after the first round of consultations to adopt a ‘primary beneficiary model’ under which the government would pay for biosecurity and customs services and the airlines for aviation security. These two sets of costs are of roughly equal order, producing a 50:50 split.

“The second issue for consultation was how the aviation security charges should be allocated among the airports and, through them, the travelling public. Response was mixed but the majority view was for a uniform charge.

“On current costs, that translates into $8.31 per outward bound international passenger: $9.31 when the $1 Civil Aviation Authority levy is added in. This money will be collected by the airlines and is likely to be recouped through ticket prices. The $9.31 represents a small increase on the $5 passengers pay now through their $25 airport departure fee, the balance of which goes to the airports.

“The flat rate implies a small subsidy [44c a passenger] from the metropolitan airports - Auckland, Wellington and Christchurch – to the regions but is much the cheapest option for the smaller regional airports: Hamilton, Palmerston North, Dunedin and Queenstown,” Dr Cullen said.

“Initially we proposed that any new international airport must meet the full costs of all government services. We did this to avoid any further unnecessary and expensive proliferation of resources given that New Zealand already has a high ratio of international airports to population and given that a large slice of the costs of servicing them is borne by the taxpayer.

“But we have listened to the arguments raised by Rotorua, Invercargill and Napier airports, and by the local Labour MPs on their behalf, and recognise that it would be hard to justify separate treatment should they develop successful international services.

“Accordingly, new entrants will now have to carry their full passenger clearance costs for a probationary period of one year only. At the end of that time, they will be brought into the funding regime provided they can meet the threshold of 9000 departing international passengers a year.

“This is not a high hurdle to cross but airports seeking international status will have to take the cost of fully funding border security services in the first year into account as they assess the economics of the venture.

“We also indicated in December the introduction of a small user pays element for biosecurity and customs at the regional airports to reflect their greater per passenger costs.

“I am happy to now be able to reassure the regions that we have since rejected this idea in deference to local feelings and because the amount recovered – around $244,000 a year – was too small to justify the administrative expense,” Dr Cullen said.

The new framework will come into effect on 1 October.

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