Regulation

Aeronautical and non-aeronautical activities

Auckland Airport’s business is divided, in economic terms, into two ‘tills’. One is the aeronautical till, which is subject to economic regulation. The second is the non-aeronautical till, which is subject to open market competitive forces. A dual till regime also applies in Australia, though the scope of activities and monitoring processes differ.

Aeronautical activities comprise all elements of the company that relate to its aeronautical services, including:

• airfield facilities to enable the landing, take-off and movement of aircraft, such as runways, taxiways and aprons;
• terminal facilities for the processing of passengers; and
• aircraft and freight facilities for the maintenance and service of aircraft (including re-fuelling) and the handling of freight.

For airfield facilities, Auckland Airport charges landing fees and parking charges to the airlines on a user-pays basis. Landing charges are based on an aircraft's Maximum Certified Take-Off Weight. This means that large, heavy aircraft pay more than small, light aircraft. Heavier and larger aircraft require longer, wider and stronger runway pavements, take up more space on the aprons and typically deliver more passengers to use the terminal facilities. Parking charges are levied on hourly rates by size of aircraft.

For terminal facilities, Auckland Airport charges the airlines passenger service charges and check-in charges. These changes include recoveries for terminal space, plant and equipment and services.

Auckland Airport has also set a Runway Land Charge associated with holding land for the future aeronautical development of a second runway at Auckland Airport.

All other activities are non-aeronautical. These activities compete with other similar businesses, are tendered by way of concessions/ licences to operate, or are discretionary to the users of the airport. Examples include the retail outlets in the terminals (duty free stores, speciality stores, news and book stores, and food and beverage outlets), taxis, public transport, car parks, car rental tenancies and property leases. The company gains revenue from these sources through commercially negotiated concession agreements, rental agreements, licence fees and direct charges for parking or the use of other facilities.

Current regulatory framework for airports

Auckland Airport’s aeronautical activities are subject to information disclosure regulation under Part 4 of the Commerce Act 1986. This regulation is designed to provide airport businesses with the right incentives to act in a way that benefits consumers over the long term. The Commerce Commission monitors airport performance and price setting, as well as the effectiveness of the information disclosure regime.

The information disclosure regime includes:

• annual disclosure and monitoring of financial performance, quality (as measured by reliability measures, passenger satisfaction and operational improvement processes), capacity utilisation indicators and capital investment
• a price setting disclosure following the setting of standard aeronautical prices (every five years) which provides information on the basis for pricing and targeted returns

Annual Disclosures

Shown below are Auckland Airport's most recent aeronautical annual disclosures:

Annual Disclosures 2024

Previous years

Pricing decisions

Auckland Airport is subject to the Airport Authorities Act 1966, which requires consultation with major airline customers on aeronautical charges at least every five years, as well as consultation on significant capital expenditure projects.

Price Setting Event 4

Auckland Airport commenced its consultation with major airlines on PSE4 aeronautical prices in June 2021. As part of this consultation, given the uncertainty as to the timing and shape of the aviation industry’s recovery from the COVID-19 pandemic, Auckland Airport consulted with major airlines on a delay to the PSE4 pricing decision. PSE4 covers aeronautical prices for the 5-year period from the 2023 financial year to the 2027 financial year.

After considering airline feedback, in January 2022, Auckland Airport announced a price freeze for FY23 which held prices flat at FY22 levels to help airlines rebuild following the COVID-19 pandemic. Prices for FY24 onwards were to be determined following a second round of airline consultation during FY23, with those prices to be based on then forecast passenger volumes and set to achieve Auckland Airport’s target return on aeronautical capital for the full 5-year PSE4 pricing period (in-line with the Input Methodologies specified by the Commerce Commission). The price freeze was supported by the vast majority of airlines operating at Auckland Airport as well as the Board of Airline Representatives of New Zealand (BARNZ).

After completing the second round of consultation with major airlines on the prices for the remainder of the PSE4 period, Auckland Airport announced its price reset on 8 June 2023. The new charges set out in the Schedule of Charges (see link below) take effect on 1 July 2023 and will be in place for the remainder of PSE4 (ie until the end of FY27). These new charges will fund part of the much-needed investment in infrastructure that is underway at Auckland Airport. For PSE4, this amounts to $2.6 billion of commissioned infrastructure, focusing on important airfield, terminal, baggage and transport improvements to be completed and in use by airlines by the end of the five-year period.

Schedule of Standard Aeronautical Charges and Payment Policy (Passenger and Aircraft Charges)

August 2023 price setting disclosure – FY23-FY27 (PSE4)

• PSE4 Disclosure (commentary)
• PSE4 Disclosure (schedules)
• Appendix A: PSE4 Aeronautical Capital Expenditure Programme
• Appendix B: PSE4 Standard Aeronautical Charges, Terms and Conditions
  
• PSE4 Presentations:
  • 8 June 2023 Aeronautical Pricing Decision
  • 17 August 2023 Price Setting Disclosure

August 2021 – application of Regulatory or Requested Investment Policy – October 2021 – June 2022

On 11 August 2021, following consultation with substantial airline customers Auckland Airport advised airlines it would increase the International Passenger Charge (IPC) and Transit Passenger Charge (TPC) by $2.00+GST, effective 1 October 2021 to 30 June 2022. This increase was made under the Regulatory or Requested Investment (RRI) policy in accordance with Standard Terms and Conditions.

The adjustment was made to recover a portion of the actual costs for operating a segregated international terminal, which has enabled quarantine free travel while meeting the safe border management requirements set by the New Zealand government in response to the global pandemic.

Price Setting Event 3

Auckland Airport’s aeronautical price path consultation with major airlines and representatives for Price Setting Event 3 (PSE3) covered aeronautical prices for the 5-year period from the 2017 financial year to the 2022 financial year. The pricing decision was announced in June 2017.

Discounts were subsequently announced in February 2019 to the FY20-22 charges. Finally, as set out above, in August 2021, international passenger charges were adjusted for the last 9 months of FY22 under the Regulatory or Requested Investment Policy.

Any decision to reset prices triggers a requirement for Auckland Airport to release a price setting disclosure. Auckland Airport’s price setting disclosures for PSE1, PSE2 and PSE3 are set out below.

February 2019 – decision to discount charges – FY20-FY22 (PSE3)

On the 22 February 2019, following consideration of the Commerce Commission’s final report on pricing from FY18 – FY22 Auckland Airport announced it would reduce prices to airlines by providing discounts for the remainder of the pricing period. No price setting disclosure is required, however further explanation of how this decision has affected the pricing forecasts will be released as part of the standard annual disclosure process. The discounted prices are provided below and a summary of the decision can be found in our media release.

Note: In order to best meet Ministry of Health guidelines common use international kiosks check-in services will not be available at Auckland Airport until further notice.

Voluntary Disclosure Schedule 18 & 19

August 2017 pricing setting disclosure – FY18-FY22 (PSE3)

• PSE3 Disclosure (commentary)
• PSE3 Disclosure (schedules)
• Appendix A: Cross reference table of Information Disclosure Determination requirements and where information can be found in the Price Setting Disclosure
• Appendix B: PSE3 Aeronautical Capital Expenditure Programme
• Appendix C: PSE3 Standard Aeronautical Charges, Terms and Conditions
• PSE3 Presentations:
  • 1 August 2017 Price Setting Disclosure
  • 8 June 2017 Aeronautical Pricing

Please note:

• This Price Setting Disclosure is disclosed pursuant to clause 2.10(3) of the Determination.
• Under the Determination, Price Setting Disclosures must be completed only in relation to specified airport services.
• Accordingly, these Price Setting Disclosures should not be interpreted or read to cover the total operations of the company – the Price Setting Disclosure relates specifically and solely to specified airport services.

Commerce Commission review

A key part of the regulatory regime is the Input Methodologies (“IMs”). IMs set out how airports must calculate aspects of their annual disclosures (e.g. how assets are valued for regulatory disclosures) and other aspects of the regulatory regime (e.g. how the regulator estimates the industry-wide cost of capital for monitoring purposes).

The IMs must be reviewed at least every seven years, and the Commerce Commission completed a review of the current IMs in December 2016. The final decision reaffirmed that the Commission does not set prices for airport services and that its focus is on ensuring there is transparency in relation to the pricing decisions made by airports.

Shown below are links to the Commerce Commission review documents:

• Airport Information disclosure determination (20 December 2016)
• Airport Input methodologies determination (20 December 2016)
• Commerce Commission decision documents

Regulatory and other disclosures in relation to Auckland Airport’s electricity distribution network

The Electricity Industry Act 2010 (“Act”) requires us to publicly disclose on our website, and provide to the Electricity Authority, certain information that arises from our status as an electricity distributor and both Mercury NZ Limited (“Mercury”, formerly Might River Power Limited) by virtue of Dr Patrick Strange being a director of Mercury, and by Ms Julia Hoare, Ms Tania Simpson and Mr Mark Cairns being directors of Meridian Energy Limited, as a connected retailer, and both Mercury and Meridian’s involvement in retailing more than 5 GWh of electricity in the last financial year to customers connected to our network.

The directors noted above have all been granted exemptions from compliance with sections 75, 77 to 79 and 88 of the Act, enabling them to be appointed as a director of both Auckland Airport and the relevant company as noted above. The exemptions are subject to certain conditions.

Section 77 of the Act sets out the requirements in relation to use of systems agreements between a distributor and a connected retailer which the directors of the distributor must comply with. Attached is the latest Director’s Certificates signed by all directors except Dr Patrick Strange, Mr Mark Cairns, Ms Julia Hoare, and Ms Tania Simpson(as they have been granted exemptions from compliance with s77) and the use of system agreements for both Mercury and Meridian, which together meet the requirements of section 77.

• Director’s Certificate for the preceding calendar year in relation to s77
• Use of system agreement between Auckland Airport and Mighty River Power Limited dated 27 March 2002
• Variation to the above use of system agreement between Auckland International Airport Limited and Mighty River Power Limited dated 30 April 2013
• Use of system agreement between Auckland Airport and Meridian Energy Limited dated 5 December 2008
  
  

Section 88 of the Act sets out requirements in relation to disclosure of the quantity of electricity sold each financial year by connected retailers to customers who are connected to the distributor’s network. Attached is the latest Director’s Statement signed by a director other than Dr Patrick Strange, Mr Mark Cairns, Ms Julia Hoare, and Ms Tania Simpson (as they have been granted exemptions from compliance with s88) which meets the requirements of s88.

• Director’s Statement for the preceding financial year in relation to s88