AVIATION

Airport changes given time to bed in before more reviews

Thursday 26 June 2008, 4:34PM
By Lianne Dalziel
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The government has decided to give more time for changes to airport regulation to bed in before deciding whether to proceed with further work looking at the effectiveness of that regulation and whether regional airports should also be regulated under the Commerce Act.

Commerce Minister Lianne Dalziel and Transport Minister Annette King said today the decision to hold off on a further review was made to give Auckland, Wellington and Christchurch airports and their customers more certainty over the next two years as the Commerce Commission develops input methodologies for the new information disclosure regime contained in the Commerce Amendment Bill currently before Select Committee.

"The timing of the proposed work would have been unnecessarily burdensome in addition to what will be expected of all parties adjusting to the new regulatory regime in the coming two years," Lianne Dalziel said.

In November last year the government made decisions which will transfer responsibility for the regulation of aeronautical charges at Auckland, Wellington and Christchurch airports from the Airports Authorities Act to the Commerce Act.

This change is aimed at improving information disclosure required of airport companies at the time of setting their prices.

"The new regulatory regime will require disclosure of a full range of relevant information in accordance with rules that are to be prepared in advance by the Commerce Commission," Lianne Dalziel said.

As part of those decisions the government had decided to carry out a further review, to be concluded by June 2009, to investigate whether other airports should be subject to regulation and whether other forms of regulation to that proposed should apply to Auckland, Wellington and Christchurch airports.

"One of the rationales for a further review in the short-term was to investigate whether the information disclosure proposals would be adequate in ensuring the prices that airports charge their airline customers did not take advantage of their natural monopoly," Lianne Dalziel said.

However concerns have been raised about the uncertainty created by the overlap in the timing of further work with the development of the new regulatory regime decided on late last year.

"I am aware that further work carried out now may not be sufficiently robust to provide reliable information and the work in developing the rules for the new regime should ideally feed into any future review," Lianne Dalziel said.

Accordingly, the Ministers of Commerce and Transport will consider whether a further review of airport regulation is necessary once the Commerce Commission have completed and implemented the rules under the new regime in the Commerce Act.

At this time, whether additional airports warrant regulation under the Commerce Act will also be addressed under the amended provisions of the Commerce Act. The generic provisions of the amended Commerce Act will provide the potential for a regulatory inquiry, should it be deemed necessary.

Contact: Elspeth (Ellie) McIntyre, Press Secretary, ph 04 471 9397 cell 021 227 9397
All Lianne Dalziel's media statements and speeches are at www.beehive.govt.nz/lianne+dalziel

Q & A’s

Why have the Government decided not to proceed with the further work programme on airport regulation outlined in the November Cabinet paper?

This decision has been prompted by concerns that further work on airport regulation at this time will exacerbate the uncertainty that the specified airports will face over the next two years as the Commerce Commission develops the input methodologies for the new information disclosure regime (as set out in the Commerce Amendment Bill before Select Committee at the moment).

The timing of the proposed further work may have been unnecessarily burdensome in terms of time and cost the airports and airlines would have to devote to the concurrent projects over the next two years.

What was the intended purpose of the further work programme on airport regulation proposed for the 2008/09 period?

A. This work was to twofold: to investigate whether other airports should be subject to regulation under the Commerce Act; and to investigate whether other forms of regulation to that proposed should apply to Auckland, Wellington and Christchurch airports.
With regards to the second stream, whether other forms of regulation should apply to Auckland, Wellington and Christchurch airports, one of the rationales for a further review was to investigate whether the information disclosure proposals would be adequate in restraining the exercise of market power by these airports.
However without any practical experience with the new regime it is difficult to judge whether it will be sufficient. In other words, the review would have been conceptual in nature.

Q. Why did the Government make decisions on the regulatory regime for airports in November last year?

Since the 2002 Commerce Commission inquiry into airports, there have been a number of issues raised by airlines relating to the regulatory regime for airports. Work undertaken by the Ministry of Transport has also highlighted deficiencies in the information disclosure regime applying to airports. These issues were further highlighted in submissions made by members of the aviation sector in the context of the regulatory control provisions of the Commerce Act. As part of providing for a credible regulatory regime, with improved transparency about regulatory matters, the Government considers it timely to strengthen the regulatory regime for airports. Developing a more credible regime that provides appropriate guidance and incentives for parties on desired regulatory outcomes takes time. The Government is of the view that it is desirable to have such a regime in place in time to inform the airport and airline consultation processes for when prices are next to be set by 2012.

When is the further work on airport regulation likely to occur now?

A. The Ministers of Commerce and Transport will consider whether a further review of airport regulation is necessary once the Commerce Commission have completed and implemented the input methodologies and pricing principles under the new regime in the Commerce Act.

At a minimum the Commerce Commission is required to monitor and report on the information disclosed by airports on an annual basis, and are also required to carry out a thorough review of the effectiveness of new regime once the airports and airlines have completed the 2012 price reset period.

What does this decision mean for the work programme on whether second tier airports should also be subject to regulation under the Commerce Act?

A. At this time, whether additional airports warrant regulation under the Commerce Act will also be addressed under the amended provisions of the Commerce Act, once in place. The generic provisions of the amended Commerce Act will provide the potential for a regulatory inquiry into airports if concerns are raised, and thus the regulation of additional airports, if specific criteria are met.