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Submissions and Conference Transcripts

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Submissions and conference transcripts regarding the airport control inquiry from the years 1998-2001.

Supporting Documents

Submissions on Process and Preliminary Issues

01/07/1998 (9 documents)

Air New Zealand - Proposed Timetable, 22 June 1998 Adobe Acrobat PDF (33 KB) (opens in a new window): We refer to your media release issued 4 June 1998/48 seeking comments on:

· the approach the Commission proposes to take in its Price Control Study on Airports;

· any preliminary issues interested parties might wish to raise about the scope and nature of the Minister of Commerce’s request to the Commission; and

· the use of electronic communications to gather and distribute information.
Airways Corporation of New Zealand Ltd - Price Control Study Of Airfield Activities - Process And Preliminary Issues, 30 June 1998 Adobe Acrobat PDF (32 KB) (opens in a new window): At this stage we do not have any specific comments to make on this matter.

However, we would like to be kept informed of developments, and, in particular, can you please provide us with copies of all preliminary submissions that yo u receive on process or other issues, or, alternatively, let
us know as soon as those submissions are availablee v ia th Commission's
website.
Ansett New Zealand - Price Control Study Of Airfield Activities - Process And Preliminary Issues, 6 July 1998 Adobe Acrobat PDF (12 KB) (opens in a new window): Ansett New Zealand is certainly supportive of the Commission’s proposed price
control study on Airfield Activities.
Auckland International Airport - Price Control Study of Airfield Activities, 29 June 1998 Adobe Acrobat PDF (16 KB) (opens in a new window)
Auckland International Airport - Facsimile Transmission, 16 July 1998 Adobe Acrobat PDF (39 KB) (opens in a new window)
BARNZ - Price Control Study Of Airfield Activities Adobe Acrobat PDF (32 KB) (opens in a new window)
CIAL - Email: Price Control of Airfield Activity Adobe Acrobat PDF (4.7 KB) (opens in a new window)
Qantas - Submission on the Proposed Timetable for Progressing the Price Control Study of Airfield Activities Adobe Acrobat PDF (13 KB) (opens in a new window)
WIAL - Price Control Study Of Airfield Activities - Process And Preliminary Issues, 29 June 1998 Adobe Acrobat PDF (17 KB) (opens in a new window)

Submissions on Extension of Reporting Date

01/08/1999 (11 documents)

Air New Zealand - Airport Pricing Inquiry - Proposed Timetable Revision Adobe Acrobat PDF (24 KB) (opens in a new window): Air New Zealand therefore submits it is imperative the Commission take an active role in monitoring airport pricing practices over the next three years. It also submits it is desirable for the Commission to retain the flexibility to respond to changing circumstances, such as airport abuse of monopoly
power, the clarification of the price control provisions of the Commerce Act, or the completion of the initial disclosure and/or consultation rounds under the Airport Authorities Amendment Act, rather
than setting a rigid timetable up to three years in advance. This position is supported by Air New Zealand’s economic advisers in a letter sent under separate cover to the Commission.

Air New Zealand wishes to have the opportunity to address the Commission directly on these monitoring & timetabling issues as well as the manner in which the inquiry is to be progressed.
Airways Corporation of New Zealand Limited 9 August 1999.pdf Adobe Acrobat PDF (7.6 KB) (opens in a new window)
Airwork (NZ) Limited, Airpost Limited and New Zealand Post Limited - Price Control Study of Airfield Activities, 16 August 1999 Adobe Acrobat PDF (12 KB) (opens in a new window): We are responding on behalff of Airwork (NZ) Limited, Airpost Limited and New
Zealand Post Limited.
Ansett New Zealand Limited - Proposed Timetable - Price Control Study of Airfield, 18 August 1999 Adobe Acrobat PDF (26 KB) (opens in a new window): In light of the extended reporting date, it is Ansett New Zealand’s view that It is
both important and desirable that the Commission continues to maintain an
active overview of the sector during the period leading to the filing of the final
report with the Minister in August 2002.
Auckland International Airport Limited - Commencement Date of Inquiry Into Price Control Control Study of Airfield Activities Adobe Acrobat PDF (14 KB) (opens in a new window)
Aviation Industry Association of New Zealand Incorporated - Response to Proposed Timetable for Progressing the Inquiry, 16 August 1999.pdf Adobe Acrobat PDF (26 KB) (opens in a new window)
Board of Airline Representatives of New Zealand Limited (Incorporated) - Submission on the Proposed Timetable For Progressing the Price Control Study of Airfield Activities, 18 August 1999 Adobe Acrobat PDF (22 KB) (opens in a new window)
CIAL - Response to Price Control Study of Airfield Activities by Anthony Harper Lawyers Adobe Acrobat PDF (58 KB) (opens in a new window)
Dunedin Airport Limited - Price Control Study of Airfield Activities Adobe Acrobat PDF (18 KB) (opens in a new window)
Qantas - Submission on the Proposed Timetable for Progressing the Price Control Study of Airfield Activities Adobe Acrobat PDF (23 KB) (opens in a new window): This Submission responds to the Commission’s request for written submissions on the Proposed Timetable for Progressing the Inquiry, dated 6 August 1999. Qantas has also had an opportunity to participate in the formulation of an alternative proposal put forward by the Board of Airline Representatives of New
Zealand (Inc), and strongly supports the BARNZ submission.
WIAL - Extension of Reporting Date for Airport Price Control Study, 19 August 1999 Adobe Acrobat PDF (29 KB) (opens in a new window)

Submissions on Draft Report

14/08/2001 (42 documents)

Orion - Submission on the Electricity Governance Board Draft Determination - 26 April 2002 Adobe Acrobat PDF (70 KB) (opens in a new window): Orion New Zealand Limited (Orion) makes this submission as a prospective distributor member of the EGB rulebook. Orion supports the submission made by the Electricity Networks Association.
Auckland City Submission on Commerce Commission's Draft Report on Price Control Study of Airfield Activities at Auckland, Wellington and Christchurch International Airports Adobe Acrobat PDF (68 KB) (opens in a new window)
BARNZ - Glossary Adobe Acrobat PDF (268 KB) (opens in a new window)
BARNZ Attachment 1: AIAL Zone 1 Airfield land valuation adjustment Microsoft Excel Spreadsheet (16 KB) (opens in a new window)
BARNZ Attachment 2: AIAL Excess Returns Counterfactual Microsoft Excel Spreadsheet (15 KB) (opens in a new window)
BARNZ Attachment 3: Benefits Analysis - AIAL 2000 Microsoft Excel Spreadsheet (298 KB) (opens in a new window)
BARNZ Attachment 4: Benefits Analysis - CIAL 2000 Microsoft Excel Spreadsheet (222 KB) (opens in a new window)
BARNZ Attachment 5: AIAL runway photograph Adobe Acrobat PDF (1.9 KB) (opens in a new window)
BARNZ Attachment 6: Auckland International Airport - Airfield Valuation for Landing Charges Adobe Acrobat PDF (44 KB) (opens in a new window)
NZSF - Submission on Draft Report - Price Control Study Of Airfield Activities At Auckland, Wellington, And Christchurch International Airports. Adobe Acrobat PDF (11 KB) (opens in a new window)
Business NZ - Submission on Draft Report on Price Control Study of Airfield Activities at Auckland, Wellington, and Christchurch International Airports Adobe Acrobat PDF (42 KB) (opens in a new window)
Christchurch City Holdings Ltd. - Submission on Commerce Commision Report on Price Control of Airfield Activities Adobe Acrobat PDF (17 KB) (opens in a new window)
Federated Farmers of New Zealand - Submission on the Draft Report Price Control Study of Airfield Activities at Auckland, Wellington and Christchurch International Airports Adobe Acrobat PDF (30 KB) (opens in a new window)
CIAL - Response to Commerce Commission Draft Report Adobe Acrobat PDF (306 KB) (opens in a new window)
CIAL - Report on Valuation Approach and Methodology for Specialised Airfeld Assets (runway, taxiways, and aprons) Adobe Acrobat PDF (34 KB) (opens in a new window)
Dr Michael Lawriwsky - Opinion On the Asset Beta of Christchurch International Airport Adobe Acrobat PDF (257 KB) (opens in a new window)
UnitedNetworks - Submission on Draft Report - Price Control of Airfield Activities Adobe Acrobat PDF (55 KB) (opens in a new window)
Silver Fern Shipping Ltd. - Submission on Draft Report - Price Control Study of Airfield Activities Adobe Acrobat PDF (26 KB) (opens in a new window)
Wellington International Airport Limited (WIAL) Presentation - Air New Zealand/Qantas Alliance Adobe Acrobat PDF (342 KB) (opens in a new window): To clearly demonstrate the critical importance of competition for both market growth and the continuing introduction of new product and services
WIAL Appendix 1: WIAL Review of Operating Expenditure Adobe Acrobat PDF (29 KB) (opens in a new window)
WIAL Appendix 2: Review of Airline Paper on WIAL Historical Returns Adobe Acrobat PDF (20 KB) (opens in a new window)
WIAL Appendix 2: Total WIAL Company Results Adobe Acrobat PDF (218 KB) (opens in a new window)
WIAL Report: A Critique of the Commerce Commission’s Draft Findings on the Efficiency of Price Control of WIAL Adobe Acrobat PDF (141 KB) (opens in a new window)
WIAL Report: Expert Report of Graeme J. Horsley On Commerce Commission Preliminary Views on Asset Valuation Adobe Acrobat PDF (44 KB) (opens in a new window)
WIAL Report: Expert Report by John Vessey on the Commerce Commission's Preliminary Views on Historic Cost and Replacement Cost Adobe Acrobat PDF (75 KB) (opens in a new window)
WIAL Report: Historic Cost and Replacement Cost: Efficiency Implications of their Use in Price Setting by LECG Economics Advanced Adobe Acrobat PDF (156 KB) (opens in a new window)
WIAL Report: Review of the Commerce Commission’s Draft Views on the Cost of Capital of Wellington International Airport Limited’s Airfield Activities by LECG Economics Advanced Adobe Acrobat PDF (250 KB) (opens in a new window)
Auckland International Airport Limited - Submission on Commerce Commission Draft Report (July 2001) and Preliminary Recommendations - Airfield Price Inquiry Adobe Acrobat PDF (473 KB) (opens in a new window): The Board and Management of AIAL are both disappointed and surprised at the preliminary view the Commission has reached.

Disappointed because the draft recommendation has been based on a qualitative analysis of net efficiency benefits which has been sourced from incorrect financial data and includes a series of basic calculation errors.

Surprised because the Commission has subjectively elected to adopt a number of economic principles that have very limited academic support and no
precedent when attempting to approximate a competitive market situation.
Attachment 1: Critique of Appendix 8 Commerce Commission Draft Report: Price Control Study of Airfield Activities Adobe Acrobat PDF (93 KB) (opens in a new window)
Attachment 1: Auckland International Airport Limited - Expenditure Reconcilation Microsoft Excel Spreadsheet (22 KB) (opens in a new window)
Benefits Analysis - AIAL 2000 Corrected Numbers Microsoft Excel Spreadsheet (306 KB) (opens in a new window)
Auckland International Airport Limited Adjusted Commerce Commission Model Review Adobe Acrobat PDF (616 KB) (opens in a new window): ‘Phe Commerce Commission released its Draft Keport dated 3 July 2001 of the Price Control Study of Airfield Activities at Auckland, Wellington and Christchurch Airports. Included in this Report was a financial analysis iniespect of past and projected airfield activities at Auckland International Airport (“AIAL"). This financial analysis is r&erred to in this document as the Commerce Commission Model (the “CC Model”).
Attachment 2: NERA - A Report Prepared for Auckland International Airport Limtied - Price Control Study of Airfield Activities: Critique Adobe Acrobat PDF (301 KB) (opens in a new window): The Commission based its preliminary recommendation upon analysis suggesting price regulation would lead to net efficiency gains. The four “cornerstones” of the analysis presented in the Draft Report are:

• modelling showing AIAL has earned excessive profits over the period 1989 to 2000;

• further modelling indicating the degree of excess profitability would increase
significantly over the period 2001 to 2003;

• estimates of dynamic inefficiency showing substantial potential gains available from improved investment incentives; and

• estimates of the cost of price regulation which were lower than these potential gains.

We believe the assumptions and level of rigour in the analysis underlying these cornerstones to be mediocre. The Draft Report does not make a reasonable case to support the preliminary recommendation for price control at AIAL.
Attachment 3: Alfred Khan - Statement on behalf of Auckland International Airport Limited Adobe Acrobat PDF (59 KB) (opens in a new window): Auckland International Airport Ltd (AIAL) has asked me to offer my opinion on two issues raised by the New Zealand Commerce Commission’s draft report, Price Control Study of Airfield Activities at Auckland, Wellington, and Christchurch International Airports:

1. should land held for future airport development be excluded from the asset base when determining whether current and prospective returns are excessive?; and

2. are the pricing principles that only “used and useful” assets should be included in the asset base and that ”today’s users should only bear today’s costs” economically sound (either generally or as applied specifically to the pricing of AIAL’s airport services)?

As I understand the Commission’s report, its affirmative answer to the first question is based on its acceptance and interpretation of the principles set out in the second question. My own answers to both the above questions—based on the Commission’s own stated first pricing principle (which I enthusiastically support) that “prices should be as close as possible to their allocatively efficient level over the medium-term”1 and in the context of the
Auckland Airport’s present situation—are emphatically in the negative.
Attachment 4: Auckland Uniservices Limited - Price Control Study of Airfield Activities at Auckland, Wellington and Christchurch International Airports Adobe Acrobat PDF (462 KB) (opens in a new window): The main difference in the parameter measures between the Commission’s and AIAL’s determination of WACC lies in the estimate of the asset beta. AIAL’s asset beta should be close to the asset beta for UK electricity firms of 0.56 and not at a midpoint between US and UK electricity firms. The Commission notes that AIAL’s beta may be higher than that for electricity comparators; as airports are likely to experience greater demand shocks. By making no adjustment due to perceived
Auckland UniServices Limited 2
“difficulties in estimating accurately how much to adjust beta by”, there is a clear downward bias in the Commission’s estimate of AIAL’s asset beta.
Using a risk free rate of 6.92%, an asset beta of 0.45 to 0.55, a debt premium of 1%, a debt to equity ratio of 40:60 and a PTMRP of 8%, the post-tax nominal WACC for AIAL’s Airfield Activities lies within the range 8.5% to 9.3%.
Attachment 5: Derek Nolan - Statement In Relation to Comments on the Second Runway at Auckland on behalf of Auckland International Airport Limtied Adobe Acrobat PDF (38 KB) (opens in a new window): It is important to explain, by way of background, the framework within which AIAL is required or expected to manage and operate the Airport in terms of environmental legislation and related documents, and more particularly, the development of the second runway.
Attachment 6: Thomas Bass - Statement on Behalf of Auckland International Airport Limited Adobe Acrobat PDF (32 KB) (opens in a new window): I was asked by AIAL to assist in the preparation of its April 27 submission to the Commerce Commission and contributed to the sections on international regulation, including Attachment 6, “The Role of Airport Regulation and its Practical Implications.” In this Statement I offer comments on related issues in the Commission’s Draft Decision of July 3 2001. These comments are mainly, but not exclusively, from a UK perspective.
Attachment 7: Copy “Properties” – Commerce Commission Models – CIAL and AIAL Adobe Acrobat PDF (113 KB) (opens in a new window): Attachment 7 - Copy “Properties” – Commerce Commission Models –
CIAL and AIAL
Simon Terry Associates - Submission on Draft Report - Price Control Study of Airfield Activities Adobe Acrobat PDF (34 KB) (opens in a new window)
Todd Energy - Submission on Draft Report - Price Control Study of Airfield Activities Adobe Acrobat PDF (6.7 KB) (opens in a new window)
Ministry of Transport Submission to Commerce Commission Price Control Study of Airfield Activities Adobe Acrobat PDF (133 KB) (opens in a new window)
Auckland Regional Council - Submission to Report on "Price Control Study of Airfield Activities at Auckland, Wellington & Christchurch International Airports" Adobe Acrobat PDF (11 KB) (opens in a new window)