Fees deal revealed in airport charges squabble

A report in NZ’s The Dominion Post says that Air New Zealand was refunded up to 20 per cent of its landing fees by Wellington International Airport during the past five years, helped by the demise of Origin Pacific last year, and Qantas reducing its services.

Wellington airport acting chief executive Mike Basher said the refunds were part of a performance-based agreement under which Air New Zealand received a rebate if it exceeded passenger growth targets.

The five-year agreement expired on June 30 and ran alongside the normal landing charges which were also reviewed every five years.

The collapse of regional airline Origin Pacific and Qantas pulling out of the Wellington-to-Christchurch route had handed those passengers to Air New Zealand, helping the airline to easily exceed the targets, he said.

Passenger numbers through the airport increased by 1.74 million in the past five years to 4.64 million. Air New Zealand had also lowered airfares to generate demand during that time and increased its domestic capacity.

Wellington airport’s aeronautical revenue had grown to $41.9 million from $33.6 million in 2003 and Air New Zealand was the airport’s biggest user.

The airport tried to talk to Air New Zealand three months before the agreement ended about the possibility of a new contract, Mr Basher said.

“They did not engage fully in those discussions.” “Instead, last month the airline filed for a judicial review of the airport’s new increased landing fees.” “That made it a lot harder to reach another agreement”, Mr Basher said.

However, Air New Zealand’s group general manager of short haul airlines, Norm Thompson, said the airline had told the airport it wanted to roll over the previous agreement, which also helped the airport to meet its targeted weighted average cost of capital.

But the airport responded with a proposal that required Air New Zealand to start long-haul services from Wellington to gain a rebate on landing fees.

Wellington airport is pinning its hopes on the new Boeing 787, which technically has the ability to fly from the capital’s short runway to Asian destinations like Singapore with a full load of passengers – the first big plane with that ability.

“At this time, no such long-haul route out of Wellington is financially viable,” Mr Thompson said.

But Air New Zealand had opened new domestic routes serving Wellington, including a direct flight to Invercargill and extending the Queenstown service to year-round.

Mr Basher denied the airport’s proposal was linked to long-haul services.

Mr Thompson said Air New Zealand was willing to talk to the airport about a new target-based rebate agreement.

The judicial review in the High Court at Wellington would consider the airport’s process for setting the new landing charges, and was unrelated to a rebate agreement.

Air New Zealand says that the new landing charges were a 34 per cent increase, not the 2.85 per cent a year for the next five years being imposed by the airport. But Mr Basher said Air New Zealand was including the loss of its rebate under the passenger growth agreement in its increase.

Air New Zealand has also sought a judicial review of Auckland International Airport’s landing fee increases.

It has also called for an overhaul of the way airports are able to set landing fees. Airports must consult airlines but do not have to gain agreement on new charges.

Report by The Mole