Risk of Auckland Airport regulation overhyped, analysts warn

McIntyre explained that the fears of Auckland Airport being overly regulated are exaggerated. While aeronautical activities at the airport are regulated, the retail and car parking activities are not. This structure is referred to as a dual till model. Despite concerns about the dual till being eliminated and the airport becoming heavily regulated, Jarden analysts believe that these worries are unfounded.

The Ministry of Business, Innovation and Employment (MBIE) competition policy team is currently focused on scrutinizing airports. However, there is no indication from MBIE of any intention to completely overhaul airport regulation. Instead, the agency is responding to submissions from the airline industry regarding mergers and anti-competitive behavior. According to the Jarden analysts, Cabinet papers suggest that other sectors, such as fuel, residential building products, grocery, and personal banking, are more likely to be targeted for regulatory changes.

The Board of Airline Representatives of New Zealand (Barnz) has expressed concerns about the lack of oversight regarding how airport investments affect travelers. Auckland Airport has made decisions to invest a significant amount in aeronautical capital without completing consultations with its airline customers. While Barnz raises important points about the impact of airport spending on travelers, the Jarden analysts point out that Auckland Airport’s drive-up car parking rates are comparable to those in central Auckland and other major airports in New Zealand.

Auckland Airport’s revenue in 2024 was heavily influenced by its retail and car parking segments, contributing about 30% to the total earnings. Despite the potential for higher returns in unregulated operations, Auckland Airport believes that the associated risks warrant a higher return. The analysts also note that a regulatory review in the future is likely to find limited evidence of Auckland Airport abusing its market power.

To put the parking rates into perspective, the Jarden analysts compared Auckland Airport’s rates to those at the Wilson Parking facility in central Auckland. Daily charges for parking at Auckland Airport range from $46 to $62, which are in line with rates in the CBD. The analysts also mentioned that the retail and car parking segment is essential for Auckland Airport’s overall revenue, serving as a significant source of income for the company.

In conclusion, the concerns about Auckland Airport being overly regulated may have been exaggerated. While aeronautical activities at the airport are subject to regulation, the retail and car parking segments are not. The airport’s revenue is significantly influenced by these unregulated segments, and despite potential risks, Auckland Airport believes that a higher return is warranted due to the associated risks. Any future regulatory review is likely to find limited evidence of the airport abusing its market power.