Auckland Airport redevelopment will make airfares unaffordable, airlines warn

Thursday, 8 June 2023

Passengers will pay more for tickets if Auckland Airport goes ahead with a planned new terminal, airlines say.

Air New Zealand and Qantas say passengers will foot the bill with higher airfares if Auckland International Airport goes ahead with its planned $3.9 billion redevelopment plan, including the construction of a new domestic terminal.

Auckland Airport has announced increases to its aeronautical charges paid by airlines for the next five years, taking effect from July 1.

Auckland Airport chief executive Carrie Hurihanganui said the new charges would fund part of the much-needed investment in infrastructure that is underway at the airport.

The increase would cover $2.5 billion of commissioned infrastructure, focusing on important airfield, terminal, baggage and transport improvements to be completed and in use by airlines by the end of the five-year period, Hurihanganui said.

The increase also reflected the higher cost of capital in the current economic environment compared to the previous price setting event, she said.

“Travel is back, and the recovery is taking place more quickly than anyone expected. Now is the time for investment in Auckland Airport if we are to deliver the resilience and customer experience travellers want and the gateway New Zealand needs for the future,” she said.

But airlines said the cost the development would flow through to higher airfares.

Air New Zealand and Qantas said they had provided the airport with analysis of how the increases would impact their networks, showing the cost of the redevelopment would increase airport charges to the point that air travel may become unaffordable for a significant number of travellers.

Air New Zealand chief executive Greg Foran said some investment in Auckland Airport was necessary.

Auckland International Airport is digging up its runway to be used as the foundation for a large airfield development.

“However, this is an enormous spend over a short period of time that adds almost no additional capacity. All it is expected to result in is more costs for everyone who uses, relies on, or passes through the airport, including the aviation industry, the tourism industry, the whole economy, and Air New Zealand’s passengers,” Foran said.

Qantas Chief Executive Alan Joyce said airlines accepted that investment was needed, but Auckland Airport’s proposed plan “goes far beyond what is needed or affordable”.

”The necessary first phase of this redevelopment could be delivered for significantly less than $3.9 billion, and we’re conscious that the final number will probably be higher, with cost overruns common to most large infrastructure projects,” Joyce said.

Airfares were expected to reduce as capacity constraints eased globally, costs for airlines were increasing, which would limit how far fares could fall, he said.

Hurihanganui said Auckland Airport’s aeronautical charges would be rising from a low base and made up a small portion of an airline ticket.

“At $7 our current domestic jet aeronautical charges are 40% to 50% lower than comparable airports in our region and have risen just 65 cents in real terms over the last decade, reflecting the ageing domestic terminal.

“Meanwhile, international charges have fallen 10% in real terms over the past decade. Our charges currently represent about 3% to 3.5% of the cost of an average domestic or international fare.”

Hurihanganui said the ongoing recovery in aviation was strong and there was a need to invest in critical aviation infrastructure for the future.

Airline domestic jet charges would average $11.85 over the five-year years, with an initial rise of $3.50 per passenger from $6.75 to $10.25m and reaching $15.45 by the 2027 financial year.

Charges for regional services would increase from $4.40 to $7.10 in July and to $10.70 in five years.

International charges will rise by $9.40 per passenger from $23.40 to $32.80, and will cost $46.70 the end of the pricing period.

Auckland Airport’s planed new domestic terminal will bring all jet aircraft services under one roof.

“We are very mindful of cost to our airline partners and ultimately travellers. That’s why we have been working hard to deliver a pragmatic and affordable solution while responding to airline requests for changes as much as possible,” Hurihanganui said.

The airport had to invest to ensure its infrastructure was met an appropriate standard and could cope with the expected increase in passenger numbers, she said.

“There are now 22 airlines flying to 37 destinations to and from Auckland Airport, up from 12 airlines and 21 destinations during the toughest days of the pandemic.

Hurihanganui said big airlines werereporting strong, with some committing to multi-billion-dollar investment in their own fleet and airport hangars.

“We need to do the same to ensure travellers have a great experience when they travel through Auckland Airport. The domestic terminal was already under significant capacity strain in 2019 and then the pandemic came. We can’t delay this any longer.

She said landing charges made up about 3% to 5% of an airfare and were comparable with other main airports in the region.

“We are not alone in investing in upgrading Auckland Airport. It’s something you are seeing play out at airports right around the world, with airports investing US$2.4 trillion (NZ$4t) in aviation infrastructure by 2040 as part of a once in a generation rebuild.”