Airways Corporation of New Zealand Limited Pricing for the 2019-2022 Period
NZ Airports was concerned at the high price increase and cited examples of cost drivers that they expected would reduce costs eg ‘volume-driven costs’, ‘cloud-based software’ and ‘digital towers’.
AIRWAYS’ RESPONSE Since the proposed prices were published the ATC collective employment agreement has been settled. This has resulted in a cost saving of $0.8m in FY20, $0.3m in FY21 and $0.5m in FY22. Overall this reduces Airways’ proposed price increase by 0.3%. While cost growth is now exceeding inflation, Airways has a proud record of controlling costs, and the increased costs are a reflection of the challenging industrial and economic environment that Airways is operating in. As BARNZ and Air NZ have pointed out, Airways is focussed on delivering the benefits of the business transformation programme. Managing staff leave balances is also a focus of Airways’ management over the 2019 - 2022 pricing period. In response to concerns raised by NZ Airports, Airways would like to clarify that ‘volume-driven costs’ are additional base costs involved in servicing additional traffic volume. When offset with the additional volume growth presented in section 5, the net impact is a reduced price. ‘Cloud-based software costs’ are an additional operating cost, but have resulted in avoided capital spend - the net effect being a lower price increase. Similarly the digital tower costs included in this pricing period will lead to avoided capital expenditure, which will result in a lower price impact for customers.
The final increase in base operating costs is $6.4m p.a., as outlined in figure 18.
Figure 18 – Increase in base operating costs 2019-2022
Operating costs above inflation ($m)
FY20 FY21
FY22 Total
2.2
Collective settlements
0.1
1.4 0.7
1.5
Auckland property costs
1.3
0.1
0.1
1.0
Cloud-based software costs
1.0
–
–
0.7
Volume-driven costs
0.7
–
–
1.0
Minor projects
4.8 (4.4)
0.6
Total increase in base operating costs
7.9 (2.9)
1.4 6.4
26
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