Qantas warns of 1.5 million annual passenger drop for Auckland if fees continue

Price hikes at Auckland International Airport will mean visitor numbers drop by an estimated 1.5 million a year, according to the Australian national carrier Qantas.
Airlines – against being charged more if the airport gets its way – aren’t the only ones concerned. The proposal is also spooking Local Government New Zealand, the body representing councils nationwide.
With a multi-billion-dollar pipeline of development work to pay for, Auckland International Airport released its proposed charges in June 2023, with domestic charges rising in stages from $6.75 a passenger to $15.45 by 2027.
Regional flight charges will increase from $4.50 to $10.70 over the period, and those for international flights will increase from $23.40 to $46.10.
In all cases the airport said these charges were justified and were behind comparators, having historically had lower pricing than Christchurch, Wellington and Australasian airports.
The regulator’s draft report found the fees would remain at or below other regulated New Zealand airports running up to 2027.The Commerce Commission agreed with Auckland Airport’s approach on a number of issues in a draft review of these prices, including the level of consultation, quality of planning and the need for new infrastructure.
However, it found Auckland Airport was targeting excess profits of between $193.4 million and $226.5 million over five years.
Auckland Airport’s submission disputed the commission’s finding that it targeted excess profits through its application of methodology set by the Commerce Commission, saying it came down to how it and the regulator treated the impact of the pandemic.
However, the airport said if the Commerce Commission’s final report maintains this view it would be happy to change, “If the final report continues to say that our weighed average cost of capital is too high, we will adjust our pricing – consistent with the approach we took in the previous pricing review. We will confirm the details of this after the Commission’s final report is released.”
Submissions on its draft report were published on Monday.
Qantas, and the wider aviation industry, have been vocal throughout Auckland Airport’s price setting process. The airline says investment is necessary but the plan outstrips what is needed and contributes to (alongside other measures) an over-recovery of $295m.
Airlines pass these fees onto passengers, so upping fees means flying into Auckland will be more expensive.
Qantas said the sharp escalation in prices resulted “from a monopoly infrastructure provider over-investing and over-charging under a capital plan and design that exceeds industry requirements”.
It said the perceived overcharging would lead to more than 1.5 million fewer passengers through Auckland by 2032 as travellers opted to go elsewhere.
Other entry fees to New Zealand have also risen, or are about to rise, dramatically.
Auckland International Airport handled 15.9 million passengers in its 2023 financial year.
The Australian airline said this would have flow-on effects to other domestic airports and wider economic activity, “including loss of jobs, tourism spend and a material reduction in GDP”.
Qantas credited this stance to a report on how airfare pricing affects demand the airline industry body commissioned from Oxford Economics Australia.
That report was submitted to the commission but published with significant redactions.
Auckland Airport’s price setting is also cause for concern in New Zealand’s regional communities, according to a submission by Local Government New Zealand.
The local government body said it appreciated the need for investment in New Zealand’s largest airport, but it was concerned the excess profits identified in the review would result in unreasonable ticket price increases and pose a threat to the viability of smaller carriers.
“Ensuring people can get around New Zealand quickly, safely, and affordably is a critical issue for local government, particularly councils in more isolated parts of the country,” its submission read.
“With limited other options for interregional travel beyond private vehicles, New Zealand relies heavily on the service provided by its airports and airlines to bring tourists, workers and other visitors in and out of our communities.”
Much of the scrutiny out of the Commerce Commission and airlines had focused on the international terminal upgrades, but Local Government New Zealand said it encouraged the airport to consider how it could deliver its domestic terminal upgrades in a way that reduced pressure on airline charges.
It said ticket prices were already a significant barrier to many people being able to travel around the country, particularly when travelling to, from or between smaller cities.
“Further increases to what are already relatively high prices don’t only have a direct impact on consumers in the short term. They could represent an existential threat to smaller airlines that are unable to absorb increases or spread them across a wide range of routes.
“In a small market with few established players, this could mean a significant reduction in levels of service available to New Zealanders.”
*Story was updated to include more from Auckland Airport’s Commerce Commission submission