Latest / Early Edition with Ryan Bridge / Cath O'Brien: Board of Airline Representatives Executive Director on Auckland Airport targeting excess profits

Transcript

Cath O'Brien: Board of Airline Representatives Executive Director on Auckland Airport targeting excess profits · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Commerce Commission says Auckland Airport's planned charges to airlines over
• 0:04
  Speaker 1: the next five years are too high and could result
• 0:07
  Speaker 1: in excess profits. The airport is set to undergo a
• 0:10
  Speaker 1: multi billion dollar redevelopment, including a combined domestic and international terminal.
• 0:16
  Speaker 1: Auckland Airport was set to increase aeronautical charges to airlines,
• 0:19
  Speaker 1: a cost which would have been passed on to passengers
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  Speaker 1: according to those airlines. The executive director of the Board
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  Speaker 1: of Airlines Representatives, Catho Brian is with me Kath good morning.
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  Speaker 1: They have found that the charges, well the plans for
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  Speaker 1: expansion were reasonable, but that the profit was going to
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  Speaker 1: be too high.
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  Speaker 2: Yeah, that's right. So you know, for the second period running,
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  Speaker 2: given that airport's at pricices every five years, Auckland Airport
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  Speaker 2: has been found to be targeting excessive profits, which is
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  Speaker 2: what the commission, the language like commission uses and they
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  Speaker 2: are doing that by setting a target return that is
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  Speaker 2: too high. Again the kind of rule set that the
• 1:01
  Speaker 2: Commission requires them to follow, and you know in this
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  Speaker 2: case it really is extremely high. So Auckland Airport this
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  Speaker 2: time is targeting a return of eight point seventy three
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  Speaker 2: percent on aeron recall capex and against the commission midpoint
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  Speaker 2: of six point ninety eight. So you know, and those
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  Speaker 2: are all numbers, right, but actually what that that kind
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  Speaker 2: of looks like is something like two one hundred and
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  Speaker 2: twenty six million dollars of excess profits. So not all
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  Speaker 2: the profits, just profits that are unreasonable.
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  Speaker 1: Quite a lot, quite a lot, quite a lot, right,
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  Speaker 1: quite a lot, Keith, what is that? What is that?
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  Speaker 1: Because because the original plan they the airline said would
• 1:43
  Speaker 1: have increased fares by forty six dollars for a domestic
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  Speaker 1: fare by twenty thirty two, do you think now the
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  Speaker 1: airport will just come back and say, all right, we'll
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  Speaker 1: adjust our pricing in line with what the ComCom says
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  Speaker 1: and everything will be fine.
• 1:56
  Speaker 2: I think that's exactly what they will say, you know.
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  Speaker 2: And the last time they set prices and pricesing Event three,
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  Speaker 2: they reduced their prices by thirty three million, But then again,
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  Speaker 2: at that time the delta was much smaller, so at
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  Speaker 2: that time they were targeting a much less high like return,
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  Speaker 2: if you like. And this time they've really gone to town.
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  Speaker 2: So it was pretty clear that the Commission was going
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  Speaker 2: to find that this way, that average return or whack
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  Speaker 2: was too high, and so here we are. And so
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  Speaker 2: I don't think that deals with the problem of how
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  Speaker 2: expensive the capital plan that the airport has is. At
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  Speaker 2: six odds billion, do.
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  Speaker 1: You think are you saying, do you think they're baking
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  Speaker 1: in a bit of fat when they take these plans
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  Speaker 1: to the conquer?
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  Speaker 2: Well, I guess you know. The rules say that the
• 2:47
  Speaker 2: airport can can set its capex and can set a
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  Speaker 2: target return, and the rules say that the airport can
• 2:54
  Speaker 2: set those prices as they wish, and that airlines must pay.
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  Speaker 2: And you know, we we don't have any kind of
• 3:01
  Speaker 2: contract or agreement. We just get the bill, and so
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  Speaker 2: you can see why we get a little bit wound
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  Speaker 2: up about it.
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  Speaker 1: Certainly when you're getting an IOU that's got two hundred
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  Speaker 1: million dollars potentially in excess profits attached to it, I
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  Speaker 1: can see why you would be. Kat, thank you very
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  Speaker 1: much for your time. We have to leave it there.
• 3:16
  Speaker 1: Kath O'Brien, who is with us from the Board of
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  Speaker 1: Airlines Representatives this morning. For more from News Talks b
• 3:23
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• 3:26
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