Auckland Airport infrastructure spend to go under microscope

Article – BusinessDesk

Oct. 20 (BusinessDesk) – The Commerce Commission will pay particular attention to Auckland International Airport’s planned $1.8 billion infrastructure spend in the regulator’s upcoming airport price review.Auckland Airport infrastructure spend to come under microscope in ComCom review

By Paul McBeth

Oct. 20 (BusinessDesk) – The Commerce Commission will pay particular attention to Auckland International Airport’s planned $1.8 billion infrastructure spend in the regulator’s upcoming airport price review.

The competition and consumer watchdog is embarking on its semi-regular investigation into how Auckland and Christchurch airports set their prices, under an information disclosure regime which is meant to discourage airport monopolies from price gouging. The review will cover the airports’ proposed prices between July 2017 and June 2022 with a view to ensuring they aren’t earning excessive profits and provide services that reflect customer demands.

The regulator will start on Auckland Airport first, saying it’s of “greater interest to a wider variety of interested persons given it is our largest national airport and the scope of investment it is proposing”, although both final reports are due in August next year. Wellington International Airport’s review is scheduled for 2019.

The commission will gauge the reasonableness of both airports’ profits, and whether prices are set inefficiently. For Auckland that would investigate whether a lack of congestion charge sends unclear signals about the timing of the proposed second runway. In Christchurch’s case that will see the regulator review whether a new pricing structure works.

Auckland Airport’s capital spending programme will also get reviewed, with the transport hub forecast to boost investment in aeronautical infrastructure by five times the usual.

“Auckland Airport has indicated it has experienced a material change in conditions over the past two years as growth has outstripped projections,” the commission’s process and issues paper said. “It stated that a step change in investment is required in order to ensure that it is able to provide sufficient capacity and quality services now and in the future.”

That investment programme also holds risks in that the airport operator can’t meet the capital expenditure forecasts, and could be exposed to cost overruns, the regulator said.

In its previous reviews, the regulator found Auckland’s disclosure limited excessive profiteering and promoted innovation and providing appropriate service levels, but didn’t have enough data to draw conclusions on the operational and capital spending efficiency. The commission’s previous report on Christchurch found the airport didn’t limit excessive profits, although concerns about a lack of transparency were largely quelled by the airport operator voluntarily releasing more information.

Auckland Airport shares rose 0.6 percent to $6.285.

(BusinessDesk)

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