Auckland Airport is set to rake in $190 million in excess profit from its aeronautical charges, the Commerce Commission has concluded in its final report into the Airport’s 2022–2027 pricing period.
The watchdog found that while the airport’s proposed investment programme falls within a “reasonable range”, the revenue it aims to generate from airlines and passengers is “excessive,” with targeted returns significantly above what is considered fair.
“The Airport is targeting excess profit of about $190 million and its charges are too high, with businesses and consumers likely to end up carrying much of the cost-burden,” commissioner Vhari McWha says.
The Commission estimates the airport is aiming for a return of 8.73% from aeronautical activities — such as aircraft landing and passenger terminal use — compared to an estimated reasonable return of between 7.3% and 7.8%.
“Price increases will fund investment needed to improve customer experience, build more resilient infrastructure and add additional capacity, but the increases are higher than what is needed to achieve these outcomes,” McWha says.
One of the key projects in the Airport’s investment plan is the construction of a new domestic terminal, which will be integrated with the international terminal. Auckland Airport says the move will improve transit passenger experiences and ensure capacity for future growth, replacing the nearly 60-year-old existing domestic terminal.
Despite concern over pricing, the Commission acknowledged Auckland Airport had taken appropriate steps in preparing its investment plan.
“While views on the type, size and timing of the investment differ among the Airport’s customers, our analysis shows Auckland Airport engaged multiple third-party experts to assist with costing its investment plan and considered a wide range of options for its new terminal building,” McWha says.
“There are a range of investment outcomes that are consistent with what we’d expect to see in a competitive market. This range reflects uncertainty about future demand and choices about factors such as service quality. We are satisfied that Auckland Airport’s decision is within this range.”
The Commission also flagged the Airport’s approach to depreciation — the recovery of infrastructure costs through charges — as an area where a more consumer-friendly approach could be taken.
A different depreciation method could reduce prices in the short term and better align with market norms, the Commission said. Auckland Airport has signalled a willingness to reconsider this when it next sets prices.
The final report largely echoes the Commission’s draft conclusions published in July 2024.
Auckland Airport responds, cuts prices
Auckland Airport has announced it will lower airline charges over the next two years, following the Commerce Commission’s finding that its previous price path would have resulted in excessive profits.
The airport says it will discount per passenger airline charges on an average basis by about $1.10 for regional travel to $9.00, $1.70 for domestic jet travel to $12.80, and $4.80 for international travel to $38.90.
The move brings its targeted return for the 2022–2027 pricing period down to 7.82% — within the Commission’s benchmark range.
“We respect the regulator’s findings … [t]hese discounts will bring our prices within the range the Commerce Commission found to be reasonable,” Auckland Airport chief executive Carrie Hurihanganui says.
“Auckland Airport carefully balances how we set charges with the need to invest in the future resilience and capacity requirements of New Zealand’s gateway airport… To support this, investors require fair returns and a stable regulatory regime.”
The regulator also backed the airport’s major infrastructure projects, including the $3.9 billion integrated terminal development, which is now 31% complete.
“We are really heartened that the Commission confirmed Auckland Airport is investing at a reasonable level to ensure the future resilience of New Zealand’s gateway airport,” Hurihanganui says.
She says the Airport’s new terminal would boost domestic seat capacity by 26% and improve competition in a market that remains one of the least competitive in the world.
Despite aligning its target return with the Commission’s range, Auckland Airport and the New Zealand Airports Association are continuing with a merits review in the High Court over the Commission’s approach to calculating returns, due to be heard in July.
