2019 Pricing Consultation

Airways Corporation of New Zealand Limited Pricing for the 2019-2022 Period

PART A - Airline prices

This section summarises customer submissions on airline prices and provides Airways’ response to those submissions. Customer feedback provided an essential input into the price-setting process; all feedback was carefully considered before finalising prices. Overall revenue Airways’ Pricing Framework details the methodology used to price services and can be downloaded from Airways’ website at: www.airways.co.nz/products-and- services/air-navigation-services/new-zealand-service-framework/ans-services-and- pricing-explained The Pricing Framework was developed and implemented following consultation with customers in 2012 as part of Airways’ commitment to transparent price-setting. Airways has addressed feedback related to the Pricing Framework in the ‘Submissions on other topics’ section of this document. Using the Pricing Framework, Airways sets prices by calculating the overall revenue required, allocating the revenue to specific services and calculating unit prices based on forecast volumes. Overall revenue has been calculated using the Economic Value Added (EVA) framework. The EVA framework calculates overall revenue as the aggregate of costs including a commercial return (the building blocks). The EVA building blocks are provided in Appendix 2.1. AIRWAYS PROPOSED To continue to provide safe, high-quality services now and in the future, Airways proposed a revenue increase of $54.1m over the 2019-2022 pricing period. After taking account of volume growth, a price increase of 18.9% was required. SUMMARY OF SUBMISSIONS BARNZ expressed their increasing concern about the cost of air travel in New Zealand and whether it will remain sustainable. BARNZ noted other aviation industry charges, such as biosecurity and aviation security, are also increasing from 1 July 2019. NZ Airports noted the proposed price increases are well above the level of inflation. This places a further burden on aircraft turnaround costs, which is a factor in the competitiveness and sustainability of destinations. NZ Airports also felt that technology improvements, efficiency gains and volume growth should combine to contain price increases. They submitted that these should be signalled now, at least in principle, to provide some balance to the short-term price increases. Aviation NZ was concerned by Airways’ monopoly position, and felt that Airways is not subject to the same competitive pressures that exist in the commercial world. Aviation NZ also said there should be reimbursement when Airways does not deliver services.

CONSULTATION PROCESS

EXECUTIVE SUMMARY

PART A AIRLINES

PART B GENERAL AVIATION

APPENDIX 1 PRICING TABLES AND EXAMPLES

APPENDIX 2 SUPPORTING INFORMATION

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