Family-owned airline questions fairness of ‘skyrocketing’ Auckland Airport charge
Friday, 23 February 2024
Air Chathams is concerned about the effect of even higher prices at Auckland Airport on the future viability of its family business.
Auckland Airport said its domestic charges were up to 50% lower than other airports.
The airport is planning a multi-billion-dollar upgrade of its terminals.
Air Chathams is concerned that the “skyrocketing prices” Auckland Airport (AIAL) is charging smaller airlines will have a big impact on customer demand for important regional connections.
Air New Zealand has asked the Commerce Minister for an urgent inquiry into the regulations on the airport, which it said was falling to stop the overspending of the airport’s upcoming multi billion-dollar redevelopments and would result in costs being passed on to passengers.
But AIAL said its planned work will not increase prices for travellers, and its charges make up only 3-5% of the average airfare.
It also claims its domestic charges have been 40-50% lower than other airports for many years.
Air Chathams chief operating officer Duane Emeny said pricing has already been tough as it is.
“The increases we’ve already seen in this price period are extremely challenging, especially when combined with an almost 50% increase in commercial leases for hangars needed to service our Auckland-based fleet over the past decade including the pandemic years,” he said.
“We’re very concerned about the effect of even higher prices on the future viability of our family business”.
Emeny said regional airlines face some of the steepest price rises over the price setting event 4 (PSE4) yet they get the least in return.
He said the Regional Passenger Charges (RPC) will see increases from $2.64 to $6.88 over the FY23-27 period, and landing charges for aircraft (less than six tonnes) will jump to $115.04 from $60.24.
“It equates to hundreds of thousands of dollars extra each year which we have to find or absorb.
“What’s really tough about the prices at Auckland Airport is that regional airlines like Air Chathams and Barrier Air will use very little of what the airport company is building. We are all the way down the end of the ageing domestic terminal, and this building will be almost unchanged in this price period.”
From Auckland, Air Chathams flies to Whakātane, Whanganui, Kāpiti, the Chatham Islands, and Norfolk Island, as the sole operator.
“We won’t be using the international terminal,” Emeny said, “because we only have one international destination in Norfolk Island, and that’s a single flight per week in summer with no flights over winter. At best, we will get some use from some of the tarmac upgrades.”
He agreed that AIAL needed an upgrade, but the proposed investments should be efficient, sustainable, and affordable for regional airlines and travellers.
“We support the need for improvements at Auckland Airport, but we don’t feel it is fair to put this burden on small turbo-prop airlines with limited access to capital. Our margins are so tight and it’s not like if we disappear that those remote regions will have another airline right in behind us ready to take up the route. It just means they lose their air service and the wider economic benefit that direct airlinks provide them”.
Emeny said passing on cost increases to travellers will impact on demand and fewer people will fly as a result.
If demand for flights to the regions is reduced, that means fewer services, a reduction in cargo options, and ultimately some tough times and decisions for airlines like Air Chathams, he said.
An AIAL spokesperson said regional airlines were a very important part of the aviation landscape at Auckland Airport.
“We have partnered and championed Air Chathams right from the start of their operation, working tirelessly to enable them to be operationally and commercially successful because of their importance to the regions they serve.”
Auckland Airport rejected any suggestion that its infrastructure programme will make regional travel unaffordable.
Consumer New Zealand said significant price increases passed onto travellers could affect tourism as well as the cost of consumer goods brought in by air through Auckland Airport.
“We would be concerned if prices were increased beyond what the airport needs to operate and make reasonable investments for the future. Similarly, we would be concerned if airlines used price increases by the airport to blur the reasons for their own price increases,” chief executive Jon Duffy said.
“We would expect the Commerce Commission to take a dim view of this and take action where appropriate so that consumers are not misled.”
Duffy said the airport is a natural monopoly and as such parts of its operation is overseen by the Commerce Commission in a regime designed to ensure the airport consults with key stakeholders on prices and capital expenditure plans.
Air New Zealand’s 2024 interim results, released on Thursday, stated it is reviewing fares and capacity to better reflect ongoing cost pressure.
It said operating costs, including fuel, increased 21% due to a substantial increase in long-haul flying this year.
Non-fuel operating costs have increased around 5% or $100 million due to inflation, which is on top of an increase totalling 15 to 20% across the last four years.
“The cumulative effect of these increases is having a significant impact on the cost of providing air services, including on the domestic network,” it said.