At a select committee hearing on Thursday, Air New Zealand head of government and industry affairs Duncan Small described airports as monopoly assets used to overcharge airlines.
“Since the 1990s corporate airport owners have seen airports as monopoly assets that greater and greater sums can be extracted from,” he said.
Small was appearing before the Transport and Infrastructure Select Committee which was hearing submissions on a proposed amendment to the Commerce Act which would put airports at greater risk of regulation.
The amendment will introduce a “truncated inquiry process” to investigate whether further regulation of airports is needed to ensure they run effectively.
A study commissioned by a group representing Australian and New Zealand airlines found that the average EBITDA margin of Australian and New Zealand airports, an indicator of profitability, was far in excess of international competitors.
Auckland airport’s EBITDA margin is 79 percent. The average EBITDA margin at non-Australian Airports is just 53 percent.
The airlines contend that this is too high and that airports are not incentivised to reinvest income in infrastructure. Bell argued that Auckland Airport in particular was making excessive returns to shareholders when it should be investing in infrastructure.
Airports New Zealand Chief Executive Kevin Ward disputed this measurement.
He said airports costs were mainly in infrastructure, so using measurements like EBITDA did not paint an accurate picture of the airport’s profits.
“We think the regulatory regime is working exactly as intended and the costs are fair and reasonable,” Ward said.
Commerce Minister Kris Faafoi said he was happy with the proposals in the amendment bill, which leave the door open to more regulation if necessary.
“The bill as we’ve put it in at the moment is strengthening the regime for airports so that we have other regulatory options to make sure that pricing stays within what is a reasonable limit,” Faafoi said.
Acting Prime Minister Winston Peters noted that Auckland Airport was a monopoly and said that he would be talking to people concerned.
“There’s been a lot of controversy all round the country about certain regional airline charges including Auckland,” he said.
Commercial information subject to the Official Information Act
The bill will give the Commerce Commission the ability to initiate a market study of a market sector it believes may be operating inefficiently. New Zealand is one of the few developed nations to have a commerce regulator that lacks this power.
But some submitters raised concerns that the Commission’s new powers could make commercial information subject to release under the Official Information Act.
A written submission from law firm Russell McVeagh raised the concern that the Commerce Commission would hold large amounts of commercially sensitive information, which could be subject to the Official Information Act.
This would mean the public and competitors could potentially access commercially sensitive information.
The OIA contains a carve-out for information that would unreasonably prejudice the commercial position of a company if disclosed, but submitters raised concerns that there might be some disagreement between businesses and the Commerce Commision over what was commercially sensitive.
“In our experience it is not uncommon for businesses and the Commission to disagree on the extent to which a document is commercially sensitive,” noted Russell McVeagh.
Trade Me’s head of legal and regulation, Lucy Elwood, also raised the issue of how much information could be accessed by the Commission and what this would mean if released under the OIA.
She noted that it was not unusual for the Commission and business to disagree on what was commercially sensitive.
“We have… seen material we considered confidential subsequently disclosed in Commission decision documents,” she wrote in her submission.
Faafoi said that the most important thing was for the Commission to access the information that it needed.
“The most important thing is that we get the information we need to make sure that a market is operating efficiently,” he said.
