1
00:00:00,160 --> 00:00:03,560
Speaker 1: And the COMMICS Commission has ruled that Auckland Airport's proposed

2
00:00:03,760 --> 00:00:07,120
Speaker 1: charge increased to help fund infrastructure, are too high. The

3
00:00:07,200 --> 00:00:10,680
Speaker 1: draft report states the airport's charges would see it make

4
00:00:10,720 --> 00:00:14,000
Speaker 1: about two hundred million dollars in excess profits and drive

5
00:00:14,120 --> 00:00:17,599
Speaker 1: up airfares. Auckland Airports said it would consider reducing future

6
00:00:17,680 --> 00:00:21,599
Speaker 1: charges after further consultation. Billy Moore is the CEO of

7
00:00:21,680 --> 00:00:24,800
Speaker 1: New Zealand Airport's Association and is with us now at Curtabilly.

8
00:00:25,800 --> 00:00:27,920
Speaker 1: Should I Jack just give us a little bit of

9
00:00:27,960 --> 00:00:31,080
Speaker 1: context here, remind us how this all works because Auckland

10
00:00:31,160 --> 00:00:33,600
Speaker 1: Airport is effectively regulated by the Commerce Commission.

11
00:00:34,400 --> 00:00:38,320
Speaker 2: That's right. So Auckland, Willington and christ To Airports go

12
00:00:38,440 --> 00:00:42,080
Speaker 2: through a process with the Commerce Commission after every pricing round,

13
00:00:42,200 --> 00:00:45,560
Speaker 2: so every five years they set their prices and that's

14
00:00:45,560 --> 00:00:49,160
Speaker 2: through a consultation process with all the stakeholders, including the airlines.

15
00:00:50,080 --> 00:00:53,800
Speaker 2: They make a decision about their capital plans, and the

16
00:00:53,800 --> 00:00:57,240
Speaker 2: Commics Commission reviews how they've gone about that process in

17
00:00:57,320 --> 00:00:59,760
Speaker 2: order to ensure that they're targeting the right rate of

18
00:01:00,040 --> 00:01:03,920
Speaker 2: tune and that the process has been consulative and the

19
00:01:04,040 --> 00:01:08,080
Speaker 2: followed in the right way, this is the fourth time

20
00:01:08,520 --> 00:01:10,440
Speaker 2: or can the airport has been through this process and

21
00:01:10,520 --> 00:01:14,080
Speaker 2: the draft report has come out today is now our

22
00:01:14,080 --> 00:01:18,119
Speaker 2: further consultation process before the report is finalized by Q

23
00:01:18,200 --> 00:01:18,840
Speaker 2: one next year.

24
00:01:18,880 --> 00:01:21,240
Speaker 1: And there is usually a bit of brainsmanship right between

25
00:01:21,360 --> 00:01:25,000
Speaker 1: the airport and the airlines which use those airport facilities,

26
00:01:25,040 --> 00:01:27,520
Speaker 1: and certainly this time around there's been a little bit

27
00:01:27,560 --> 00:01:30,160
Speaker 1: of tension. Some of the airlines, particularly in New Zealand,

28
00:01:30,200 --> 00:01:33,040
Speaker 1: been pretty outspoken and saying they felt the charges were

29
00:01:33,160 --> 00:01:35,680
Speaker 1: too high. So talk us through what the draft report

30
00:01:35,720 --> 00:01:37,040
Speaker 1: from the Commerce Commissioner's found.

31
00:01:37,520 --> 00:01:40,759
Speaker 2: Yeah, sure, Look, this is a There is always this

32
00:01:40,840 --> 00:01:44,200
Speaker 2: kind of brinkmanship at one level or another, and that's

33
00:01:44,240 --> 00:01:47,600
Speaker 2: because the airports have to plan really long term. The

34
00:01:47,680 --> 00:01:52,840
Speaker 2: airlines are managing really short term, short term framing on

35
00:01:52,920 --> 00:01:56,760
Speaker 2: their profitability. So the process is designed to try and

36
00:01:56,800 --> 00:02:00,400
Speaker 2: balance those things and evaluate the outcomes to consumers between

37
00:02:00,400 --> 00:02:03,440
Speaker 2: those short term and long term issues. So the ComCom

38
00:02:03,440 --> 00:02:07,960
Speaker 2: has come out today with a number of draft judgments.

39
00:02:08,360 --> 00:02:11,160
Speaker 2: They have said that they think that airport's target rate

40
00:02:11,200 --> 00:02:13,840
Speaker 2: of return is too high. Now. Part of this is

41
00:02:13,840 --> 00:02:16,600
Speaker 2: because of the fact that when the airport went through

42
00:02:16,600 --> 00:02:19,160
Speaker 2: its pricing process. It was having to go by the

43
00:02:19,240 --> 00:02:22,360
Speaker 2: twenty sixteen and put methodologies from the Communis Comission. They

44
00:02:22,360 --> 00:02:24,920
Speaker 2: didn't account for the pandemic, so that all the airport

45
00:02:24,960 --> 00:02:28,680
Speaker 2: itself had to evaluate how to incorporate that risk into

46
00:02:28,800 --> 00:02:33,080
Speaker 2: its into its approach. The Commission has taken a different

47
00:02:33,240 --> 00:02:35,800
Speaker 2: view on how that should have been managed, so the

48
00:02:35,880 --> 00:02:39,639
Speaker 2: consultation process will help to flash that out and how

49
00:02:39,639 --> 00:02:41,680
Speaker 2: it should be to manage. So that's the main issue

50
00:02:41,720 --> 00:02:44,960
Speaker 2: around the target rate of return. However, on the other hand,

51
00:02:45,000 --> 00:02:49,280
Speaker 2: the Commission has said that they believe that the airport

52
00:02:49,320 --> 00:02:53,200
Speaker 2: has run a good process, that their expenditure is significant

53
00:02:53,240 --> 00:02:58,080
Speaker 2: but reasonable, and they've done an appropriate consultation process in

54
00:02:58,120 --> 00:03:01,640
Speaker 2: an appropriate costing process around all the various elements of

55
00:03:01,680 --> 00:03:05,560
Speaker 2: the capital plan. So that will be really heartening for

56
00:03:05,639 --> 00:03:07,520
Speaker 2: that you prought to hear after twelve years of this

57
00:03:07,880 --> 00:03:08,840
Speaker 2: consultation process.

58
00:03:08,919 --> 00:03:11,400
Speaker 1: Yeah, yeah, yeah, because that's a really important point because

59
00:03:11,400 --> 00:03:13,480
Speaker 1: I remember some of the criticisms, just going back to

60
00:03:13,520 --> 00:03:17,520
Speaker 1: the dispute between the airlines and the airport when this

61
00:03:17,639 --> 00:03:19,960
Speaker 1: was being prepared. I think one of the criticisms that

62
00:03:20,080 --> 00:03:23,960
Speaker 1: was leveled to the airport and you know, quite forcefully denied,

63
00:03:24,160 --> 00:03:27,160
Speaker 1: was that effectively they had sweated the asset right that

64
00:03:27,480 --> 00:03:30,880
Speaker 1: shareholders had demanded too many returns to early as opposed

65
00:03:30,919 --> 00:03:34,400
Speaker 1: to investing those returns into the future development of the airport.

66
00:03:34,440 --> 00:03:35,960
Speaker 1: So do the ComCom have stuff to say about that?

67
00:03:37,680 --> 00:03:41,600
Speaker 2: Look, I'm not sure about that aspect, but it is

68
00:03:41,640 --> 00:03:44,160
Speaker 2: a good question, I think in terms of you know,

69
00:03:44,240 --> 00:03:47,000
Speaker 2: looking back on the last kind of twelve years, there's

70
00:03:47,000 --> 00:03:51,320
Speaker 2: been periods where the infrastructure spen was deferred due to COVID,

71
00:03:51,360 --> 00:03:54,120
Speaker 2: which is perfectly reasonable, you know, I needed it wasn't

72
00:03:54,120 --> 00:03:58,400
Speaker 2: the time to have some of those costs passed through

73
00:03:58,400 --> 00:04:00,720
Speaker 2: to the airlines. There was also period where it was

74
00:04:00,800 --> 00:04:04,240
Speaker 2: just an extremely hard slog through the consultation process for

75
00:04:04,320 --> 00:04:07,480
Speaker 2: Auklin Airport. And I'm aware of even one airline that

76
00:04:07,480 --> 00:04:11,280
Speaker 2: didn't want any infrastructure investment at all. So airlines are

77
00:04:11,280 --> 00:04:14,640
Speaker 2: incentivized and it's natural and understandable that they want to

78
00:04:14,680 --> 00:04:17,279
Speaker 2: keep their input costs as low as possible. That does

79
00:04:17,400 --> 00:04:19,880
Speaker 2: mean that through these consultation process they are trying to

80
00:04:19,960 --> 00:04:23,159
Speaker 2: keep infrastructure investment to a minimum. The airport is looking

81
00:04:23,160 --> 00:04:26,520
Speaker 2: at the capacity they need to provide to bring in

82
00:04:26,560 --> 00:04:29,760
Speaker 2: more competition as well as their own resilience and sayings.

83
00:04:29,880 --> 00:04:32,599
Speaker 2: So that does mean that for an airport of this

84
00:04:32,760 --> 00:04:37,040
Speaker 2: size that it can be a big debate, it could

85
00:04:37,040 --> 00:04:40,479
Speaker 2: take a bit longer, and you could have the process

86
00:04:40,480 --> 00:04:42,720
Speaker 2: life longer than the airport would like. So there's lots

87
00:04:42,760 --> 00:04:45,880
Speaker 2: of messinations and history around there that the airport will

88
00:04:45,920 --> 00:04:48,560
Speaker 2: be able to talk in more detail about. But I

89
00:04:48,640 --> 00:04:50,760
Speaker 2: do very much sympathize with it, and now it's time

90
00:04:50,800 --> 00:04:51,520
Speaker 2: to get on for the job.

91
00:04:51,680 --> 00:04:53,680
Speaker 1: Yeah yeah, I mean it is actually like when you

92
00:04:53,680 --> 00:04:56,720
Speaker 1: break it down like that is such a complex and

93
00:04:56,920 --> 00:04:59,640
Speaker 1: kind of unique relationship right between the between the airlines

94
00:04:59,680 --> 00:05:02,760
Speaker 1: and and the airport and what both parties in the

95
00:05:02,800 --> 00:05:04,760
Speaker 1: ways in which both parties depend on each other and

96
00:05:04,880 --> 00:05:09,120
Speaker 1: yet can can sometimes be working against the other's absolute

97
00:05:09,200 --> 00:05:12,200
Speaker 1: financial interests. You know, like it is, you can you

98
00:05:12,200 --> 00:05:15,320
Speaker 1: can understand what it requires regulation, So talk to us

99
00:05:15,320 --> 00:05:19,040
Speaker 1: about the response from today. How has Aukland Airport responded?

100
00:05:20,080 --> 00:05:24,599
Speaker 2: So, Auckland Airport has said in response to the Commerce

101
00:05:24,600 --> 00:05:28,520
Speaker 2: Commission's comment upon its targeted rate of return, they've said, look,

102
00:05:28,600 --> 00:05:31,320
Speaker 2: you know, we'll engage in the consultation process. As the

103
00:05:31,320 --> 00:05:34,640
Speaker 2: final report confirms that position, then we will lower our

104
00:05:34,720 --> 00:05:38,240
Speaker 2: landing charges and Look, this is this is a really

105
00:05:38,600 --> 00:05:41,320
Speaker 2: good commitment from Aucklan Airport to see it shows the

106
00:05:41,600 --> 00:05:47,160
Speaker 2: regulatory process working the way it should. And many listeners

107
00:05:47,279 --> 00:05:50,840
Speaker 2: might recall that last time we went through this process

108
00:05:50,880 --> 00:05:53,160
Speaker 2: with all Clane Airport, a similar process happened where the

109
00:05:53,200 --> 00:05:56,760
Speaker 2: ComCom provided feedback and all couldybook did adjust their prices.

110
00:05:56,760 --> 00:05:59,440
Speaker 2: So essentially they're signaling look, of course we'll take the

111
00:05:59,440 --> 00:06:03,120
Speaker 2: commerce can view seriously. There's lots of technical stuff in

112
00:06:03,160 --> 00:06:08,919
Speaker 2: this process and they will they will respond so to

113
00:06:09,000 --> 00:06:12,000
Speaker 2: me having to monitor this kind of stuff across the

114
00:06:12,040 --> 00:06:16,080
Speaker 2: airports then and around the state of the system, that's

115
00:06:16,279 --> 00:06:18,800
Speaker 2: that's good. That's the kind of process that we that

116
00:06:18,880 --> 00:06:20,040
Speaker 2: we need to see happening.

117
00:06:20,560 --> 00:06:24,120
Speaker 1: Yeah, I'm just thinking about this from a strategic perspective.

118
00:06:24,320 --> 00:06:27,040
Speaker 1: Is it kind of like a negotiation of sorts, and

119
00:06:27,160 --> 00:06:30,080
Speaker 1: that Auckland Airport can put forward its plans and the

120
00:06:30,120 --> 00:06:32,920
Speaker 1: other regulated airports and they always go in a bit

121
00:06:33,000 --> 00:06:34,920
Speaker 1: high knowing that the ComCom is going to peg them

122
00:06:34,960 --> 00:06:35,600
Speaker 1: back a little bit.

123
00:06:37,440 --> 00:06:40,560
Speaker 2: No, I wouldn't say that. I think that can happen

124
00:06:40,600 --> 00:06:44,960
Speaker 2: in jurisdictions overseas where they some jurisdictions do require what

125
00:06:45,000 --> 00:06:49,000
Speaker 2: we call the negotiate arbitrate process, and often because there's

126
00:06:49,120 --> 00:06:52,560
Speaker 2: arbitration and the airport you know, might go high knowing

127
00:06:52,560 --> 00:06:54,880
Speaker 2: that they're going to have to negotiate down. Our system

128
00:06:55,200 --> 00:06:58,679
Speaker 2: allows the airport to make the final decision on their plan,

129
00:06:59,200 --> 00:07:04,400
Speaker 2: and that avoids that process. In my view, Essentially, our system,

130
00:07:04,440 --> 00:07:08,200
Speaker 2: which has been tested over many years and I think

131
00:07:08,279 --> 00:07:11,800
Speaker 2: is in a pretty good field state. It keeps the

132
00:07:11,840 --> 00:07:14,760
Speaker 2: airport with the power to set prices. It requires them

133
00:07:14,800 --> 00:07:17,000
Speaker 2: to do all that consultation, but they can make the

134
00:07:17,080 --> 00:07:19,920
Speaker 2: final call. And what that does is it means that

135
00:07:20,040 --> 00:07:23,040
Speaker 2: you know, they will be you know, pulled apart through

136
00:07:23,080 --> 00:07:27,120
Speaker 2: the Commerce Commission process, as they should be, but ultimately

137
00:07:27,160 --> 00:07:30,000
Speaker 2: they can get the infrastructure moving. And when we look

138
00:07:30,040 --> 00:07:33,000
Speaker 2: at other infrastructure classes around New Zealand where there is

139
00:07:33,120 --> 00:07:36,040
Speaker 2: deferral and delay, for instance, the council wants to keep

140
00:07:36,120 --> 00:07:40,160
Speaker 2: rates down to and will defer water, infrastructure maintenance, things

141
00:07:40,200 --> 00:07:44,400
Speaker 2: like that, we can avoid that phenomenon kind of happening

142
00:07:44,440 --> 00:07:46,800
Speaker 2: across the airport sector because of the ability to put

143
00:07:46,840 --> 00:07:50,720
Speaker 2: airports to take into account all the issues and still

144
00:07:50,960 --> 00:07:53,080
Speaker 2: kind of make a plan and move forward and get

145
00:07:53,120 --> 00:07:56,040
Speaker 2: down infrastructure moving. So to me, that's a really important

146
00:07:56,080 --> 00:07:59,720
Speaker 2: part of the system that helps us, you know, keep

147
00:07:59,800 --> 00:08:03,520
Speaker 2: going with the capacity and the infrastructure that our communities need.

148
00:08:03,760 --> 00:08:06,480
Speaker 1: Yeah, hey, thank you so much. Billy, really really appreciate

149
00:08:06,480 --> 00:08:08,360
Speaker 1: your time this evening. That's Billy Moore, who is the

150
00:08:08,440 --> 00:08:11,520
Speaker 1: CEO of New Zealand Airport's Association. As we said too,

151
00:08:11,560 --> 00:08:14,360
Speaker 1: that Auckland Airport is I mean, they're in the process

152
00:08:14,400 --> 00:08:19,280
Speaker 1: already of a really really significant upgrade. But yeah, it'll

153
00:08:19,280 --> 00:08:22,440
Speaker 1: be interesting to see when that final report has returned

154
00:08:22,600 --> 00:08:24,960
Speaker 1: from the Commerce Commission what has decided in terms of

155
00:08:24,960 --> 00:08:27,280
Speaker 1: fees that are likely to be passed on to us

156
00:08:27,520 --> 00:08:32,040
Speaker 1: as airline passengers. For more from Hither Duplessy Allen Drive,

157
00:08:32,200 --> 00:08:35,600
Speaker 1: listen live to news talks. It'd be from four pm weekdays,

158
00:08:35,720 --> 00:08:37,920
Speaker 1: or follow the podcast on iHeartRadio