Airways Corporation of New Zealand Limited Pricing for the 2019-2022 Period
Appendix 2 – Supporting information
Appendix 2.1: Building block components of overall revenue Overall revenue is calculated using the EVA framework. Revenue is set at a level that recovers the cost to Airways of providing its services (the building blocks). The total underlying costs have not changed from those used to calculate the FY19 prices, except for the reasons outlined in Part A, Sections 1-4.
CONSULTATION PROCESS
EXECUTIVE SUMMARY
PART A AIRLINES
$m
FY19
FY20 FY21
FY22
Baseline
Plan
Plan
Plan
Revenue Airways’ charges
PART B GENERAL AVIATION
190.2 221.4 232.9 242.5
Other revenue
0.3
0.7
0.7
0.7
190.5 222.1
233.6 243.2
APPENDIX 1 PRICING TABLES AND EXAMPLES
Building blocks Operating costs – labour
107.4 112.9
117.5
121.7
Operating costs – other
30.8
39.5
36.2
37.2
APPENDIX 2 SUPPORTING INFORMATION
Depreciation
25.1
29.8
34.3
42.7
Service enhancements
5.4
10.2
12.1
6.2
Income tax
6.1
8.3
9.4
9.9
Cost of capital
15.7
21.4
24.1
25.5
Economic value added
0
0
0
0
Other revenue: other revenue includes out-of-hours charges and recoveries where buildings have been subleased. Other revenue is offset against operating expenses. Operating costs – labour: includes all employee remuneration and related employment costs. Operating costs – other: includes all operating costs excluding labour and depreciation. Service enhancements: includes the operating costs associated with the enhanced services and business transformation, as outlined in Part A, Section 1 and Section 2. Depreciation: Airways calculates fixed asset depreciation on a straight-line basis. Depreciation will increase with any increase in the capital programme. Under EVA, amortisation is also recognised for significant leases. Significant leases include the Christchurch campus and Auckland centre. Income tax: income tax is calculated at New Zealand’s company tax rate of 28%. Cost of capital: the cost of capital is calculated as the capital charge rate multiplied by the ‘historical cost’ asset base, adjusted for depreciation. Airways does not revalue its assets for pricing purposes.
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