Conclusion
65. We (Ministers of Transport and Commerce) consider that the current regulatory regime is unsatisfactory. In our view it does not lend itself to outcomes that would be sustainable in a workably competitive market. The incentives on the airports to negotiate are weak because only consultations are required and the airports may set charges unilaterally. Critically, the threat of heavier handed regulation being imposed is weak. Although we recognise that independent analysis has not been done of the claims by airlines about over-charging by the international airports, our current regulatory regime lacks credibility and robustness.
66. We also consider it important to make timely decisions given the interest of overseas investors in Auckland airport. It is important that investors have certainty about the regulatory regime, that the regime is more mainstream internationally and that it protects New Zealand's long term best interests.
67. In our view, enhanced information disclosure with price monitoring now would provide a considerably more robust regime for airports in a timely and cost effective manner.
68. We also propose that further work be undertaken in 2008/09 on whether the scope of airports coverage should be widened and whether further regulation is desirable. Ideally the Commerce Commission as the expert regulator could be well placed to undertake such a review. However, given the substantial workload for the Commission relating to implementing proposed amendments to the Commerce Act, it would be preferable to commission an independent consultant to undertake this review.
Other airport companies
69. At present all airport companies are subject in varying degrees to the existing information disclosure requirements. In addition, the Airport Authorities Act allows them to set charges as they see fit. Although the smaller airports are, strictly speaking, natural monopolies, few if any have market power. Most only have one airline customer (Air New Zealand) which has substantial countervailing negotiating power. Therefore, the issues are somewhat different. If anything, the balance of power between Air New Zealand and the smallest airports favours the former.
70. The discussion document did not address or invite comment on smaller airport issues and nor were any comments received. Consequently, we do not have any reliable information on the nature and size of any problems, options or solutions. Therefore, we recommend that MOT be asked to carry out work on these matters and report to the Minister of Transport by 30 June 2009.
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