Option One: Take no Further Action and Let the Proposed Amendments to the Commerce Act Take Effect
23. This option is predicated on the view that there is insufficient independent and credible evidence that there is a problem with the current regulatory regime and that the proposed revisions to the Commerce Act provide (a) increased credibility of the threat of regulation by introducing new options for regulation (information disclosure and negotiate/arbitrate in addition to conventional price control) and (b) specify appropriate net benefit tests for whether regulation should be introduced.
24. Major airports (AIAL, WIAL and CIAL) maintain that the current regulatory regime is largely satisfactory. They say that consultation requirements are taken seriously with airports making adjustments to their proposals (both in terms of input methodologies, proposed capital expenditure and charges) as part of this. Judicial review also provides a check on consultation processes.
25. Major airports also state that they take the threat of price control under the Commerce Act very seriously, and that their prices are not excessive and that their charges are generally mid range compared to international airports overseas.3
Airline views
26. The airlines (BARNZ, Air Zealand, Virgin Blue) and IATA, on the other hand, argue that New Zealand's regulatory regime lacks credibility. They argue that the information disclosure regime lacks rigour and value because there are no guidelines or methodology specified and the consultation process is unsatisfactory. The statutory power for airports to set charges as they see fit appears to be unique and as a result of the regime's current design, the airports can and do make unilateral decisions on investments and set charges as they see fit.
27. Airlines also point out the absence of guidelines or binding input methodologies is a major source of dispute and means that consultation processes are time-consuming and costly.
28. Overall, airlines argue that the threat of price control under the Commerce Act is weak,4 and as a result the larger airports have been charging excessive prices.5 According to Air New Zealand, it is also unable to obtain service level agreements from particular airports – a situation which would not happen in a competitive market.
29. We (Ministers of Commerce and Transport) are of the view that there is sufficient evidence that the current regulatory regime is deficient and this option is not adequate in addressing concerns about the current regulatory regime pertaining to the major international airports.
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