Net Public Benefits
8.248 In considering the net benefits to acquirers, the Commission has had regard to both the efficiency effects (only some of the allocative efficiency) and the distributional effects of the removal of excess returns. The Commission is required by section 52 to take this approach. However, the Minister, in exercising his discretion, may wish to consider only the efficiency effects contained in the net public benefits. This approach considers the interests of the public at large, including AIAL, and not just those of the acquirers. Such an approach involves focusing on the efficiency, and ignoring the distributional, effects of control. Excess returns would be ignored, as transfers between suppliers and acquirers are considered efficiency-neutral.
8.249 Table 31 presents the Commission's estimates of the potential public benefits and costs of introducing control for airfield activities at AIAL. The figures shown in Table 31 are an average of the seven years 2001-2007. Results for individual years are shown in Appendix 13.
Table 31: Estimates of the Potential Benefits and Costs of Control on Airfield Activities Supplied by AIAL, Average Per Annum ($000s)
| | Over WACC Range | At Point Estimate |
|---|
| Total Benefits | 472 to 823 | 432 to 688 |
| Total Costs | 714 to 1,966 | 1,168 to 1,425 |
| Net Public Benefits | -1,143 to -125 | -736 to -607 |
8.250 Table 31 shows that there are no net public benefits likely to accrue from controlling the airfield activities supplied by AIAL through price cap regulation. The costs exceed the benefits irrespective of the point chosen in the WACC range. The reason for this is that the benefits of control under this approach are limited to efficiency gains, and do not include the removal of excess returns.
Back to Top