Wellington airport still 'extracting excessive profits'

The Commerce Commission says Wellington airport’s profit target is excessive.

Deputy chairman Sue Begg has today released the commission’s draft report on pricing structures and just how effective the information disclosure regime is for the airport.

Information disclosure regulation requires certain details to be disclosed publicly by the suppliers of goods or services regulated under Part 4 of the Commerce Act.

This includes, among other details, financial statements, asset values and valuation reports, prices and pricing methodologies, plans and forecasts, and quality performance statistics.

“Our draft findings are that the information disclosure regime is working well in some areas, but it is not limiting Wellington Airport’s ability to extract excessive profits,” Ms Begg says.

Wellington airport has a target of a 9.5% return but the commission’s analysis, based on new prices set in March, shows it would actually be returning 10.18% from the start of the Part 4 information disclosure regulation to the end of the 2013-17 pricing period.

Ms Begg says while the regime is working well in some areas, it has not limited the airport’s ability to "extract excessive profits".

Ms Begg says both figures significantly exceed the commission’s estimate of a reasonable rate of return, which is calculated at between 7% and 8%.

However, she says information disclosure does appear to have had a positive impact on how the airport collects revenue for different services and from different consumers.

“Wellington airport has also adopted a more transparent process in setting prices.”

The commission’s draft report has been presented to commerce minister Craig Foss and transport minister Gerry Brownlee. The commission is required to provide its report as soon as possible after any new price for a regulated service has been set.

The final report about Wellington airport should be in the ministers’ hands by December 21, while reports into Auckland and Christchurch airports should be completed next year.