Media Releases

Commission releases draft analysis of Wellington Airport’s revised pricing

17 April 2015

The Commerce Commission has today released its draft report indicating Wellington Airport is now targeting returns for the period from 1 June 2014 to 31 March 2019 that fall within an estimated range of acceptable returns.

Wellington Airport revised its landing fees after the Commission reviewed its performance under section 56G of the Commerce Act in 2013. The review found the airport was targeting excessive profits.

Deputy Chair Sue Begg said the Commission’s latest analysis estimates that Wellington Airport has set its prices targeting a return of 8.4%, which is just within the upper limit of an acceptable range of 7.4% to 8.4%.

“We are pleased Wellington Airport re-opened its prices following our review in 2013 and has reduced its charges to target what we estimate will be an acceptable return on its investment,” Ms Begg said.

“The draft report is now open for consultation and we are particularly interested in receiving feedback on our analysis. We will update the Ministers of Transport and Commerce once we have considered any submissions.”

Feedback should be sent by 8 May 2015.

The final report on Wellington Airport’s expected profitability will be released by 30 June 2015.

Background

Wellington, Auckland and Christchurch airports are subject to information disclosure regulation under Part 4 of the Commerce Act. The Commission reviews the airports’ pricing decisions in its summary and analysis capacity. The Commission does not regulate the prices the three airports charge. Airports may set prices as they see fit, but they must consult with customers on any major capital expenditure that will impact future prices.

The Commission’s ongoing regulatory role is to provide summary and analysis of the performance of the three airports. Any future decisions on airport regulation lie with Ministers.

The disclosure of information about the price setting event in 2014 is the third of its kind for Wellington Airport since information disclosure requirements were set under Part 4. The first price-setting event was in 2006, with the second in 2011. The Commission undertook a review of the effectiveness of the information disclosure regime in 2013.

The draft report released today does not include any analysis of the proposed $300 million runway extension, as Wellington Airport did not include it in the price setting event for the period from 1 June 2014 to 31 March 2019.

The estimate of the range of acceptable returns – 7.4% to 8.4% – reflects the 50th to 75th percentile estimates of a post-tax weighted average cost of capital (WACC) as at 1 July 2014.

The Commission recently changed its position on the appropriate WACC percentile range from 75th percentile to 67th percentile for a number of other sectors, but have not yet reviewed the appropriate WACC range for airports’ information disclosure. This review will be undertaken as part of the upcoming seven-year input methodologies review.

For further information, including a copy of the draft report, see the Airports information disclosure summary and analysis page.

A copy of Wellington Airport’s section 56G report from February 2013 can be found on the Reports to Ministers page.