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Airways clarifies fee plans, sees average 1.2% rise per airline, up to 30% hike in capital budget

UPDATED: The increased technology spend is required because of exponential growth in aviation volumes in the Asia-Pacific region.

Pattrick Smellie
Fri, 06 May 2016

Airways Corp, the government-owned entity in charge of traffic control, is seeking an increase in its capital expenditure of up to 30% as part of a negotiation that is expected to increase fees to airlines by 1.2% a year over the next year three years.

Airways chief executive Ed Sims told BusinessDesk this week that negotiations were advancing on a regular review of its fee structure for airlines flying to, from and within New Zealand and that the current $15 million annual capital expenditure budget, required for investing in new technology to run airports and airspace efficiently, was projected to rise "up to 20-30%."

Today, Airways' service and pricing manager Scott Scrimgeour clarified that the impact of the proposed changes per airline would be an average increase of 1.2% percent a year over the next three years, subject to finalising the process after customer feedback. The capital budget is only a portion of the total costs charged by Airways, with its fees also recovering operational costs.

"We're leveraging some cost savings initiatives and strong volume growth in the industry," Mr Scrimgeour said of the proposed increase.

The increased technology spend is required because of exponential growth in aviation volumes in the Asia-Pacific region, with annual growth in New Zealand aviation traffic recently starting to match the 6-8% annual growth rates being experienced in much of the Asia-Pacific region, Mr Sims said.

Direct services to Dubai, Qatar, and the Philippines have all been announced in recent weeks, along with greater competition on routes to the west coast of the US, all through Auckland. New air services agreements with major potential sources of tourist arrivals, such as India, have also been signed.

Mr Sims was speaking from the Civil Air Navigations Services Organisation's Asia-Pacific conference in Queenstown, where regional industry leaders have gathered for two days of discussions on how best to manage the exploding growth of aviation in the region and how to avoid the bureaucratic tangle that's evolved in Europe, which along with North America is showing more static growth patterns.

"Our region is facing a period of unprecedented growth; the projected increase in traffic and airspace congestion will have a profound impact on safety, efficiency, environmental sustainability and the wider economy," he said.

Conrad Clifford, the Asia-Pacific director for the International Air Transport Association (IATA) said growth from China, which would soon outstrip the US as the primary source of air travellers, was likely to see the emergence of Sydney and Auckland as hubs competing with west coast US airports, such as Los Angeles, for Asian traffic bound for Latin American destinations.

Budget airlines, which were a primary source of traffic growth out of Asia, were likely to fly more point-to-point routes, not necessarily using hub airports, although their preference would always be hubs.

Mr Sims said the growth in traffic into Auckland could be accommodated if Airways invested sufficiently in new technology to wring more efficiency out of the runway and the scheduling of planes waiting to take off and land.

"If we don't invest in the right technology and New Zealand finds itself where demand outstrips supply, I don't think that pressure would be too far away," he said of the potential for Auckland airport, in particular, to become overloaded, creating opportunity for other New Zealand airports, although Mr Sims doubted that outcome.

"I don't know if it will get to the point of needing new airports. I don't see regional (domestic) aircraft growing at the same rate as international traffic."


Pattrick Smellie
Fri, 06 May 2016
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Airways clarifies fee plans, sees average 1.2% rise per airline, up to 30% hike in capital budget