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83. It is recommended that the Committee:

1. Note that an accompanying paper makes recommendations for amendments to Parts 4, 4A and 5 (s 70-73) of the Commerce Act, including providing for information disclosure and a negotiate/arbitrate regime;

2. Note that airlines, related bodies and the Auckland, Wellington and Christchurch airport companies were active in making submissions on the above review;

3. Note that the current information disclosure regime for airports does not specify pricing principles or binding input methodologies and as a result does not provide any useful information on regulatory matters relating to whether airports are charging excessive prices;

4. Note that binding input methodologies can provide a valuable input into assessing whether there is evidence of abuse of market power by natural monopolies, and under the current regulatory regime for airports are currently a major source of contention between parties;

Major International Airports

5. Agree to the following changes to the regulatory regime for airports:

5.1 That the regulatory regime for aeronautical charges at Auckland, Wellington and Christchurch International Airports should be provided for in the Commerce Act instead of the Airport Authorities Act;

5.2 That Auckland, Wellington and Christchurch International airports should be subject to the proposed information disclosure regime under the amended Commerce Act;

5.3 That the Commerce Commission develops:

5.3.1 binding input methodologies (excluding weighted average cost of capital) for the information disclosure regime; and

5.3.2 non-binding guidelines covering pricing principles and weighted average cost of capital for monitoring and analysis purposes;

5.4 That the Commerce Commission undertake periodic reviews of the disclosed information against its pricing principles, after airports set charges and starting from when airport charges are reset in 2012, to assess the efficacy of the price monitoring regime, and whether further regulation is warranted;

5.5 That the costs of the regimes should be met by levies on Auckland, Wellington and Christchurch airports;

6. Note that there are currently no powers to levy airports for the costs of the regime;

7. Agree that Ministry of Economic Development will lead further work in 2008/09 to consider whether:

7.1 Additional airports to those set out in (5) should be subject to regulation under the Commerce Act;

7.2 Other forms of regulation should apply to regulated airport companies under the Commerce Act;

8. Invite the Minister of Transport and Minister of Commerce to report back to Economic Development Committee on the outcome of the work undertaken in (7) by 30 June 2009;

Smaller airports

9. Note that no work has been carried out to date in relation to the regulation of smaller airport companies and their major customers;

10. Invite the Minister of Transport to report back to Cabinet Economic Development Committee on the nature and scope of any issues, along with any recommended changes, by 30 June 2009;

Financial

11. Agree to increase funding to develop input methodologies and specifications for information disclosure, for the ongoing costs of price monitoring and to fund further work on the regulation of airports with the following impact on the operating balance:

12. Approve the following changes to appropriations to put into effect the changes in recommendation 11:

13. Note that the increase in the Non-Departmental Output Expense: Enforcement of General Market Regulation has no impact on the government’s operating balance because the funding will be recovered through levies on regulated airports;

Legislation

14. Note that the proposals in this paper, if confirmed, would be implemented as part of the proposed amendments to Parts 4, 4A and 5 of the Commerce Act;

15. Note that the Ministers of Commerce and Transport will be seeking a legislative priority to enact the proposals in this paper, in the 2008 Legislative Programme.

16. Invite Parliamentary Counsel Office to prepare drafting instructions based on the recommendations in this paper;

Publicity

17. Invite the Ministers of Commerce and Transport to announce the decisions in this paper;

18. Agree that this paper may be made public on the website of the Ministry of Economic Development and the Ministry of Transport.