Transport: Air Services

Description

Background and history

141. A variety of institutions support the delivery of air services (freight and passenger movement/services) including airports, air traffic control, and air safety and security (including police, customs and immigration). This section focuses largely on airports themselves as the main physical infrastructure that supports air services.

142. The main business of airports is handling international and domestic flights. International passenger movements—inbound and outbound leisure, business and migration trips—are of tremendous value to the New Zealand economy. Over the past 10 years, international passenger movements have grown as follows:

International passenger movements by airport (thousand passengers)

Source: Statistics New Zealand

143. Airports—principally Auckland and Christchurch—handle a relatively small volume of freight (0.6 per cent of total imports and 0.5 per cent of exports by volume), though these are of relatively high value (21 per cent of imports and 15 per cent of exports by value).[37]

Assets

144. New Zealand has 41 airports with paved runways varying from about 900 m to over 3 km in length:[38]

Over 3,047m: 2

2,438 to 3,047m: 1

1,524 to 2,437m: 11

914 to 1,523m: 26

under 914m (2007): 1

145. There are also 80 unpaved airports.

146. The airports are located throughout New Zealand[39] and vary in age and condition.

147. Auckland airport is New Zealand’s largest gateway, but Christchurch and Wellington play significant roles, especially with traffic to and from Australia.

148. In addition to the physical airports themselves, airports require appropriate infrastructure (e.g. road links) in order to support efficient passenger and freight movements.

Institutional arrangements

149. New Zealand airports feature a range of ownership structures. Many are owned by local government; Auckland Airport is a publicly listed company (with some local government shareholding); Wellington Airport is 66 per cent owned by Infratil and 34 per cent by Wellington City Council. The Crown has minority shareholdings in Christchurch and Invercargill airports, holds a 50 per cent shareholding in Dunedin and Hawke’s Bay airports, is a joint venture partner in six regional airports and operates Milford Aerodrome. There are also some privately owned airports serving commuter, tourist or general aviation markets, and military airports.

150. The operation of airports is subject to the requirements of regulation, set out in the Civil Aviation Act 1990, aviation rules and the Airport Authorities Act 1966. The latter defines the functions of airport companies and their obligation to consult major customers over capital investment and pricing.

Regulatory issues

151. Amendments to the Commerce and Airport Authorities Acts in 2008 gave the Commerce Commission new responsibilities with respect to the three major airports which, between them, account for 74 per cent of total passenger throughput. The Commission will specify information disclosure requirements for these airports, monitor and analyse that information, and report to the Ministers of Commerce and Transport on the effectiveness of the regime as soon as practicable after 2012.

152. The process, including consultation for reviewing landing charges for these, as for all other airports, remains subject to the Airport Authorities Act.

Funding and pricing

153. Funding and pricing arrangements vary but almost all airports (and certainly the larger ones) provide both contestable and non-contestable services. For non-contestable services (those making use of the runway itself), airports charge airlines in order to recover a proportion of their weighted average cost of capital, which depends on the value of the underlying airport assets. Airports charge on a per passenger per flight basis. However, for contestable services (such as parking and shopping facilities), airports tend to charge the operating businesses a fee for the lease of the premises as well a percentage of revenue from their till.

Planning

154. Current planning varies from airport to airport, as each airport manages its own capital investment.

Analysis

155. Compared with overseas airports, New Zealand’s are relatively free of congestion. However, airlines have complained of monopoly pricing, in particular by Auckland and Wellington airports. To the extent that airports have been extracting monopoly prices, it might suggest that establishing competing infrastructure in regions could provide benefits. But airports argue that they are low-cost in comparison to overseas airports, and the case for second airports within regions has yet to be demonstrated.

156. There are opposing views about whether airports have been overinvesting. Airlines have complained of having to bear the cost of “gold-plating” in some cases, while airports are of the view that the investments are necessary to attract travellers.