Airfares likely to go up as Akl Airport gets facelift - Air NZ chief

Airlines have warned that passengers will likely have to foot the bill for Auckland Airport’s $3.9 billion facelift.

As the redevelopments take place, starting with the airport’s domestic terminal, jet charges are set to increase for airlines over the next five years.

Domestic charges for airlines will increase 130%, reaching $15.45 per passenger by 2027. International charges will increase to $46, and domestic regional charges will go up 141% to $10.70 by 2027.

Airlines aren’t happy about this, with Air New Zealand and Qantas releasing a joint statement yesterday asking Auckland Airport to cool the jets.

It comes as Air NZ upgraded its current financial year forecast, expecting earnings before tax and big one-off costs to be no less than $580 million.

Speaking to Breakfast this morning, Air New Zealand CEO Greg Foran said the increase would likely be passed on to passengers, increasing their airfares.

“We’re in a business that operates at a margin, it’s a competitive business, our profits go up and down, we’re certainly having a decent run at the moment, but you know what it’s like in the airline business,” he said.

“What’s going to happen is as these costs get layered in… it’s going to end up being passed on.”

While Foran didn’t deny the airport was in desperate need of some attention, he said the true cost of the remodelling hadn’t been passed on and is calling for clearer communication.

“What we’re asking for is a view of how much the total [upgrade] is going to cost.”

He compared the situation to a house being renovated.

“We’ve got the house and the price for the garage - I don’t know how much the kitchen and the bathroom are going to cost yet.”

Foran is worried the airport will start “overbuilding” and wants a full plan for his and other airlines.

“Stage one sees a doubling of passenger charges, stage two, they go up again, but what’s going to happen when we see the total cost of this remodelling?”

He wants Auckland Airport to “take a pause” and work with other airlines before pushing forward on the plans.

“I don’t really have a choice as to where to land my planes in Auckland.

“What I don’t want to end up with is something unaffordable at the end,” he said.

In response to Foran's comments, Auckland Airport CEO Carrie Hurihanganui said the domestic terminal was “well past its used-by date”.

She said the infrastructure upgrade is something that needs to happen and can’t continue to be licked down the road.

“That infrastructure that needs to happen; we can’t continue to push that,” she told Breakfast.

“The ‘pause’ conversation that Greg refers to has been an airline conversation for many years.

“When you look at the infrastructure challenges New Zealand's facing, this ‘let’s think about it more and kick it to the right’ is not the right strategy.

“It [won’t] get cheaper” should it be delayed, she said.

When talking about the expected increase in airfares, Hurihanganui said it was up to the airlines - explaining that Auckland Airport has incredibly low charges compared to other places the airlines fly to.

“If you look at Auckland Airport’s domestic charges, they are extremely low - for the last 10 years, in real terms, they’ve increased 65 cents.

“I'm not sure what other industry you would compare that to.”

Hurihanganui said Auckland’s charges were 4% to 50% less than other airports.

“Airlines are travelling to those destinations that are changing twice as much as we are now.”

She said the roadmap for redevelopment has been very “transparent” but says unexpected costs will pop up too.

“We did caveat [the plan] is subject to change.”

“We've been very transparent about what the 10-year road map looks like, which is defined as a $5.5 billion investment.

“We need a gateway to New Zealand that is fit for the future.”