Auckland Airport plans to at least double airport fees by 2027 to pay for its multi-billion upgrade - but Air New Zealand is worried how much more the upgrade will cost, warning it is just the "tip of the iceberg".
After unveiling its upgrade plan in March, Auckland International Airport Limited (AIAL) on Thursday outlined its plan to increase its airline charges over the coming years, starting in July.
Domestic charges are set to increase from the current $6.75 to $15.45 over the next five years, while international airline charges are set to jump from $23.40 to $46.10.
The airport's two largest airlines, Qantas and Air New Zealand, released a joint statement saying it could mean air travel becomes "unaffordable for a significant number of travellers".
Appearing on AM on Friday, Air NZ CEO Greg Foran said the price hikes don't just stop there.
Foran said he was informed on Thursday of a $2.5 billion increase followed in five years' time by a $3.1 billion increase.
"This initial increase of $2.5 billion, that effectively sees a doubling of, if you like, the cost of a passenger to fly. That doesn't include the second one that I spoke about," he said.
"It's just the tip of the iceberg."
Foran said what we are seeing now is "just the early stages". He claimed they haven't seen the total cost of the rebuild yet, rather just stage one and two of potentially four stages of work.
He agrees money needs to be spent to upgrade the 57-year-old domestic terminal, but argues it should be a cheaper upgrade, calling for a one-year pause in the upgrades until a plan is developed to bring costs down.
"I don't have a competitive situation with the airport. They've decided to upgrade, they are going to spend the money and I am going to have to pay for it with every customer's support. I'd like to know how much that is," Foran said.
Auckland Airport CEO Carrie Hurihanganui said the plan is subject to change.
"The reason for that is 10 years is a very long time for any business. If you are trying to get them to guarantee what will be happening in five to 10 years is challenging but we have been very transparent in regards to what we believe that road map is going to look like," she told AM.
"Airlines use the runways, the terminals, the apron to park the aircraft, and all of those things. So it is a matter of those who use the service do pay for that and part of that is in when we invest... is that those do flow through to some of those charges."
She said there is a "natural tension" between airlines and airports, particularly when it comes to charging and no one wants the costs to go up.
"We have been consulting extensively with them [airlines] over the last two years... I understand where they are coming from and we will continue to work alongside them."
An Auckland Airport spokesperson later told Newshub they couldn't discuss where prices will land at the next pricing event.
"Because we can't say what the cost of construction will be in the future, or what the future economic conditions will be, including the cost of debt. These are key factors that determine future airline charges."
The spokesperson said airlines have "long enjoyed very low" domestic charges which reflect the age and condition of the domestic terminal.
"It's in their financial interest to hang on to that for as long as possible," the spokesperson said.
"Major airlines are reporting very healthy or even record profits, with some committing to multi-billion-dollar investment in their own fleet and airport hangars."
But now it's time the airport did the same to "ensure travellers have a great experience".
"The domestic terminal was already under significant capacity strain in 2019 and then the pandemic came. We can't delay this any longer," the spokesperson said in a statement.
"Our solution is affordable in the context of comparable airports and will support travel and tourism by greatly improving customer experience and capacity. In the long term, we all know new capacity puts downward pressure on airfares."
"Our charges only make up a small portion of an air ticket - around 3-5 percent of an airfare in FY24 - and are comparable with other major airports in the region," they added.
"We are not alone in investing in upgrading Auckland Airport. It's something you are seeing play out at airports right around the world, with airports investing US$2.4 trillion in aviation infrastructure by 2040 as part of a once-in-a-generation rebuild."
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