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Summary of Submissions

[ Last Updated 20 April 2009 ]


Comment Submitter Ministry Comment

Is the proposed allocation of costs between activities appropriate?
No. AIA Noted.
No. CIA Noted.
Yes. This is dependant on no one party causing a significant increase in the total cost of the regime. WIA Each party should already have incentives to comply with the regulation, as there are penalties for non-compliance.
There should be transparency regarding the basis on which common costs, such as the development of input methodologies, are shared between sectors. Cross-subsidisation should not occur. AIA, WIA, CIA, Air NZ The costs of IM development will be allocated to each sector based on its proportion of the total asset valuation of all three sectors.
The cost allocated to airports is unfairly high when no problems were identified in this sector. WIA The level of complaints in relation to major airports is not a relevant consideration in the allocation of the levy.

If not, what could be used, and why?
It would be more appropriate to split the costs of developing shared input methodologies equally among all participants, instead of on a sector by sector basis. AIA Disagree. This basis of allocating costs would not take into account the size and value of different businesses and their ability to pay.
CC should absorb the establishment costs. CIA Disagree. It is appropriate to directly link the costs of the regime to the justification for regulation (major airports' market power) and the consumers of the regulated services who are the direct beneficiaries of the regulatory regime.

Is share of valuation appropriate to recover costs, within activities?
No. The use of valuation of fixed assets would create inequities in regards to historic practices. CIA It is proposed that fixed asset valuations under the Airport Authorities (Airport Companies Information Disclosure) Regulations 1999 be temporarily used until a common methodology is determined by CC. Note that the industry and other stakeholders will have input into CC's determination on an appropriate asset valuation methodology.
No. There is no regulated methodology for determining the aeronautical asset base, and it is a contentious issue. AIA See comment above.
Yes. However, CC must use the generally accepted accounting principles applied in the normal accounts of the three major airports. WIA Noted.
Yes. Air NZ Noted.
No. Should not have to pay for regulation, as there have not been any Commerce Act complaints, nor have airports been criticised in any CC inquiry. CIA Whether or not there have been Commerce Act complaints is not a relevant consideration in the allocation of the levy.

If not, what could be used and why?
Levies based on the aeronautical revenues earned by the airports, because it takes into account the differing pricing regimes on introduction. CIA Disagree. Compared to relative value of fixed assets, share of aeronautical revenues is likely to fluctuate more.
Share of total passengers is preferable, as it is non-contentious, is information that is readily available, and would result in equitable allocation to the consumers who will benefit from the regulation. AIA Disagree. The share of total passengers would not be reflective of the cost of different types of passengers. In addition, the level and types of passengers would be demand driven and outside of the control of airports.

Any other comments?
The pricing regime of airport services limits the ability to pass on costs to the end users who will benefit from the regulation, because their prices are set periodically. CIA, AIA, WIA Costs will be able to be passed through to consumers as long as all parties (such as airlines) are aware of the situation. CC will reach a determination on how the costs can be passed on in their development of IM's.
Levy payments for airports should be deferred until the next pricing round when costs can be passed on. AIA Disagree. Note that the CC will make a determination as to how the costs of the levy can be passed on to consumers.
The ongoing regulatory cost should be met by the airlines so that costs can be more easily passed on to those who benefit. CIA Disagree. The justification for the regulation is based on the scope for the exercise of major airports' market power, not the airlines.
The price reduction from increased competition will be offset by a rise in prices due to the cost of the levy, so benefits to consumers will not eventuate. CIA A review of the information disclosure regime will be undertaken following the price-reset around or after 2012, and will consider how effective the regime has been in achieving the regulatory outcomes for the long term benefit of consumers.
There should be greater detail as to what activities are being funded by the levy ("Information Disclosure" and "Input Methodologies" should be more accurately defined), and there should be transparency as to how levy costs relate to CC activities. CIA, AIA, WIA, Air NZ Noted. There are existing mechanisms in place to promote accountability and transparency. This includes budget processes, performance measures, and monitoring processes.
Costs should be fair and reasonable, not disproportionate to the cost of internal resourcing. AIA, WIA, CIA, Air NZ Noted.
There should be transparency as to the methodology for allocating costs between sectors. AIA, Air NZ Noted.
Indicative amounts appear to be disproportionately high, given the intended regime for airports. AIA, WIA Out of scope.
Cost recovery should only relate to functions under Part 4 of the Commerce Act. WIA Noted.
CC should bear the risk of cost overruns if it is inefficient in its processes or does not meet its own timetable. WIA, CIA Noted. There are existing mechanisms in place to promote accountability and transparency. This includes budget processes, performance measures, and monitoring processes.
It would be reasonable to provide quarterly invoicing of the charges. WIA Noted.
Smoothing of costs over time would be desirable. AIA Noted.
There are fewer businesses under airport regulation than the other sectors, so the airports will have to pay a disproportionate share. AIA Noted. The cost will be allocated on the basis of fixed asset valuation. While large businesses across all sectors will be required to pay a larger share (for example in relation to input methodology costs) this will be reflective of ability to pay.
Regulation should be funded by government, as the benefits accrue to the general public. WIA, CIA Disagree. A levy on industry will better ensure that costs are more accurately passed on to those who benefit - the consumers of the service.

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