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Member airlines of the Board of Airline Representatives New Zealand have welcomed the Commerce Commission’s Targeted Review of Airport Regulation, released this morning.
The report examines the impact of major investment decisions made by regulated airports and finds more can be done to ensure long-term benefits for consumers.
BARNZ executive director Cath O’Brien says the organisation supports the changes announced by the Commission.
“These changes will help provide better oversight of large investment decisions,” says Cath.
“Importantly, the changes will help ensure very large developments proposed by regulated airports are efficient, affordable and don’t burden New Zealand’s aviation system or its passengers with unreasonable costs.”
Cath says BARNZ is encouraged by the Commission’s commitment to act quickly to improve regulation. “The report tells New Zealanders there’s more to be done, calling out the need for targeted legislative change. Our members hope the government takes these necessary next steps with urgency.”
Changes to regulation for airports
The Commission has announced it will update Information Disclosure regulation, which applies to Auckland, Wellington and Christchurch airports. At present, this regulation is largely backward-looking and focuses on capital committed for a single pricing period, without considering the full impact of forward investment plans.
This means the Commission currently only reviews costs after major capital projects are underway – regardless of airline support or the potential impact on growth. The proposed change would require airports to make earlier disclosures about significant capital plans.
“This makes sense,” says Cath. “Early disclosure of substantial capital plans allows the Commission to ensure these high-cost projects deliver the outcomes they promise Kiwis. It’s similar to what already happens for other monopoly infrastructure investments.”
With earlier disclosures, the Commission will also be better placed to recommend balancing tools such as tilted annuity depreciation, as noted in the report.
Independent verification and dispute resolution
The Commission has proposed requiring an independent verifier’s report for major capital plans, similar to arrangements under Transpower’s regulation.
“Airlines would welcome an independent review of substantial airport capital plans,” says Cath. “When airports commit airlines to billions of dollars of costs over many years, independent verification is essential to ensure investments deliver promised economic growth and infrastructure efficiently.”
The Commission also noted that no formal dispute resolution process currently exists under the present settings, with negotiate-arbitrate mechanisms in the Commerce Act not easily enacted.
Legislative change needed
The Commission’s review also highlights the need for legislative amendments to the Commerce Act to allow for targeted regulation of specific airports or issues, and to enable a more efficient inquiry process. These findings mirror those of MBIE’s recent Effective Regulation of Airport Services report.
“Both MBIE and the Commerce Commission have identified the same issue,” says Cath.
“The inquiry process under the current legislation is so complex it can’t be effectively used. Running an inquiry now could take years and face legal appeal.”
“If further regulation is required, the Commerce Act must be able to respond efficiently,” says Cath. “Without change, suggestions of further airport regulation are an empty threat. We urge the Minister of Commerce, Hon Scott Simpson, to ensure airport regulation is both efficient and effective.”
