Recommendations
112. Acting pursuant to the sections 54 and 56 of the Commerce Act, the Minister has required the Commission to report on whether airfield activities at Auckland, Wellington and Christchurch International Airports should be controlled under the Commerce Act. The Commission's recommendations and response to the Minister's Notice are presented below.
113. The Commission recommends that the Minister:
Question 1 - Whether Controls Should Be Introduced for Airport Activities?
Auckland International Airport Limited (AIAL)
- Recommend to the Governor-General that an Order in Council be madedeclaring that the airfield activities supplied by AIAL are controlled.
- Note that the Commission is satisfied that the airfield activities supplied by AIAL are supplied in a market in which competition is limited; and it is necessary or desirable for these services to be controlled in the interests acquirers and may, therefore, be controlled.
- Note that the Commission considers that market conditions are such that the Minister should recommend to the Governor-General that control be declared in respect of airfield activities supplied by AIAL.
- Note that the Commission has not considered the full range of control mechanisms available under Part V of the Commerce Act and that other less intrusive, and lower cost, forms of control than price cap regulation, which was used as a means of estimating the costs of control, are likely to be available. Irrespective, the Commission is cognisant that any form of control utilised needs to be commensurate with the level of market power available to AIAL, the size of the anticipated excess return, and resulting net benefits to acquirers.
Wellington International Airport Limited (WIAL)
- Agree to not recommend to the Governor-General that an Order in Council be madedeclaring that the airfield activities supplied by WIAL are controlled.
- Note that the Commission is not satisfied that the airfield activities supplied by WIAL may be controlled as it is not necessary or desirable for those services to be controlled in the interests of persons acquiring those goods or services.
- Note that if WIAL imposes a significant increase in charges as a result of its current consultation with the airlines, the Commission would likely be satisfied that it would be necessary or desirable for the airfield activities supplied by WIAL to be controlled in the interests of persons acquiring those goods or services.
Christchurch International Airport Limited (CIAL)
- Agree to not recommend to the Governor-General that an Order in Council be madedeclaring that the airfield activities supplied by CIAL are controlled.
- Note that the Commission is not satisfied that the airfield activities supplied by CIAL may be controlled as it is not necessary or desirable for those services to be controlled in the interests of persons acquiring those goods or services.
Question 2 - Specific Goods and Services to Control
- Recommend to the Governor-General that control be declared for the airfield activities supplied by AIAL listed in the following table:
Airfield Services Supplied by AIAL to be Controlled
| Airfield Activities | Goods and Services Supplied by AIAL |
|---|
| Airfields, runways, taxiways, and parking aprons for aircraft | Airfields, runways, taxiways, and aprons. |
| Facilities and services for air traffic control | None. |
| Facilities and services for parking apron control | Apron control service at the international terminal apron. |
| Airfield associated lighting | Cable ducts and light pots for the entire airfield; cabling for light fittings for aprons and first taxiways; and apron lights. |
| Services to maintain and repair airfields, runways, taxiways, and parking aprons for aircraft | Services to maintain and repair airfields, runways, taxiways, and parking aprons for aircraft. |
| Rescue, fire, safety, and environmental hazard control services | Rescue, fire, safety, and environmental hazard control services. |
| Airfield supervisory and security services | Provides and maintains security fencing. |
| Facilities/assets held for future airfield activities | Holds land for second runway. |
Question 3 - Conditions, Tests or Thresholds
- Note the following conditions, tests or thresholds that the Commission has used for determining whether section 52 is met:
- Limited competition (52(a)) - To satisfy this requirement, there needs to be more than a nominal or de minimis restriction or impairment of workable or effective competition. The following non-exhaustive list of factors are relevant:
- The number and relative size of competitors in the market.
- The potential for entry and the significance of any barriers to entry that might exist.
- The nature of the good or service, and in particular the extent to which it is differentiated.
- The behaviour of airports, and the competitive constraint that one may have upon another.
- The extent of any countervailing power of acquirers.
- The effectiveness of the regulatory environment within which airports operate.
- Evidence of airports operating inefficiently or achieving excess returns.
- Necessary or desirable in the interests of acquirers (52(b)) To satisfy this requirement, the Commission considers the likelihood, and magnitude, of net benefits accruing to acquirers. The following non-exhaustive list of factors is relevant:
- Evidence of any excess returns earned historically.
- Any forecast excess returns in the medium-term.
- Evidence of any superior performance by airports justifying excess returns.
- Evidence of any inefficiencies (allocative, productive and dynamic).
- The impact of any market power exerted in other related markets.
- Any other evidence of the exercise of market power.
- The likely benefits of control that would accrue to acquirers through the reduction or removal of excess returns or inefficiencies.
- The likely costs of control that would be borne directly or indirectly by those same acquirers.
Question 4 - Form of Control
- Note that the question of what form of control should be imposed is a matter under Part V of the Commerce Act, and not a matter for Part IV and the determination of whether to recommend control, which is the focus for this Inquiry.
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