CHARM OFFENSIVE - Orient Aviation

New Zealand’s biggest airport,Auckland International, is bracingitself for a tough fight with thecountry’s competition watchdog overproposals to impose price controls on someof its services, writes Tom Ballantyne.A July recommendation by the CommerceCommission could affect up to one third ofthe airport’s US$70.8 million annual revenue.Airport owner, Auckland InternationalAirports Ltd (AIAL), has expressed “completesurprise” at the proposed move and promiseda “forceful and comprehensive submission”in response.It is angry at two key components of therecommendations contained in what is still adraft report. One point of contention is thatAIAL should not be allowed to earn returnsfrom land held for future runway and airfieldexpansion. The second is the recommendedvaluation methodology relative to runways,taxiways and apron assets. AIAL said thesuggested system is inconsistent with normalpractice applied now and accepted in otherregulated New Zealand industries.Airport managing director, John Goulter,Auckland angry atprice controls threatsaid the regulator’s proposal is based on itsview the airport should not earn money offvacant land it has earmarked for a second runway.The second runway will be required foraircraft operations around 2007 and any saleor development in the meantime will increasethe cost of the project later, he said.Goulter said the commission’s preliminaryrecommendation also was based on assetvaluations at historic costs, although theairport values its assets at replacement cost,including depreciation.The prospect of price controls hit the airport’sshare price, which immediately dropped8%. The airport is 7%-owned by SingaporeChangi International Airport.“If the company is forced to divest this assetdue to an inability to achieve a return on it,then this would seriously affect the company’sability to deliver the necessary infrastructurewhen required and would inevitably increasethe cost in the event of the later repurchaseof the land involved,” said Goulter. “Given thepressure already on much of the infrastructureof the Greater Auckland area, it would haveto be a retrograde step that sees long-termplans for New Zealand’s gateway airport andkey support provider of the tourism industry,the wider New Zealand and Greater Aucklandeconomies, frustrated in this manner.”The commission’s report is due in November.A final decision on the recommendationswill be made by the New Zealand Government.The airport is expected to report profits ofaround US$24.6 million for the 2000-2001 year.Income in the first half, ending December 31,2000, rose 13% to US$11.7 million. The airportis a transit point for 70% of all tourists to NewZealand.Macau acceptscargo challengeThe threat of the introduction of direct air links betweenTaiwan and China has hung over Macau Airportsince it opened in 1995. Take away the Taiwanese and mainlandChina passenger traffic and there is not a lot left.But as a new China – Taiwan Air Services Agreement allowsfor the introduction of cargo flights, cargo is seen as one ofthe keys to future success and Macau Airport and its airline,Air Macau, have started to tap that potential.The airport operator, CAM Macau International AirportCompany, has said its goal is to claim 10% of the air cargomarket in the Pearl River Delta, which is put at three milliontonnes a year. In 2000, Macau Airport handled 68,084 tonnesof cargo. To snare 10% of the market with the likes of HongKong, Guangzhou and Shenzhen breathing down their necksin the region, is quite a challenge.For starters, Air Macau has chartered Malaysia’s TransmileAir Serices to fly a B727 freighter between China, Macau andTaipei. A second aircraft will be introduced in October.As well, twice weekly charter flights between Huangshan,in China, and Macau were launched by China Eastern Airlinesin August using a B737-400.September 2001 | Orient Aviation | 43