Air Chathams hit hard by Auckland Airport fee hikes

The arrival of the first Air Chathams plane at Whanganui airport in 2017.
Photo: RNZ / Robin Martin

Air Chathams says a hike in Auckland Airport fees could ground it for good.

The small regional airline claims “skyrocketing” prices being charged by Aotearoa’s largest airport will dampen demand on regional routes and threaten its viability.

Auckland Airport plans to spend up to $8 billion over 10 years upgrading facilities and that means airlines are facing increased user charges to cover costs.

The airport says its domestic charges have been rock bottom for years and up to 50 percent lower than comparable airports. Chief executive Carrie Hurihanganui previously said the airport had been “very transparent about that with the investment in the infrastructure at the airport. But it isn’t going to be unaffordable”.

Air Chathams operates services to Whakatāne, Whanganui, Kāpiti and the Chatham and Norfolk islands from its hanger in Auckland.

Its chief operations officer Duane Emeny said the airport charge increase was just another cost piling on and that had a cumulative effect.

“The last year for aviation businesses, especially the smaller ones cause we seem to get hit harder, it’s been a combination of things, you know whether it’s a strong US dollar, inflationary effects, labour costs, costs of you know purchasing parts from overseas and of course airport costs.”

The increase in airport costs was “significant” and represented “a really large change” for Air Chathams, he said.

The increase would have a big impact on the airline, which had its main base was in Auckland, he said.

Emeny said it was also one of the key ports for connecting the Chatham and Norfolk Island’s communities.

It was not as simple as passing any additional costs onto customers as the airline’s customer demand had already dropped in the last six months, he said.

“It’s going to be a tough year, it really is, we’re always looking at our numbers, looking at our performance but these things do not help.”

Asked whether it would have a big enough effect for the airline to have to consider its viability, Emeny said “absolutely”.

“Well it’s not a good scenario if Air Chathams pulls out because you know, as I’ve said in the past, there’s not a queue of airlines waiting to go into some of those ports so for them, they lose that service and they lose all of the wider economic benefit that comes with it.”

The Regional Passenger Charges will see increases from $2.64 to $6.88 over the full year 2023-2027 period, while landing charges for aircraft less than six tonnes would jump from $60.24 to $115.04, he said.

The airport increase would represent an increase of around $350,000 per annum for Air Chathams, he said.

“We’ve then got to decide how much of that can we put onto our customers, how much of it are we going to absorb and then it is increasing year on year as well.”

The increases were cumulative with airport costs having recently increased in Christchurch and an increase also expected in Wellington, he said.

“At what point does a small airline like your Chathams put its hand up and just say this is just too much, we can’t cope with this.”

Emeny said he appreciated that it was a user pays model and that Auckland Airport wanted to put the investment back into its infrastructure.

“I guess for us, when it comes to this particular price setting event, where all that cap ex [capital expenditure] spend’s going. How does that really benefit Air Chathams? I mean we’re sitting down in the ageing domestic terminal, or the regional end, we’ve got some new bathrooms, that’s great but that’s about it – I can’t see real benefits coming to Air Chats but I can see the cost increases.”

In terms of increasing airfares it all came down to what the customer was prepared to pay, and if prices were too steep people would just choose not to travel, he said.

“They won’t take that family holiday and businesses will say ‘we’re going to cut back on our travel budget and we’ll just do it all via video conference – people start factoring in decisions on the basis of prices we’re putting forward.”

Since Air Chathams took on routes in Whakatāne and Whanganui in 2015-2016, there had been a massive increase in costs, he said.

“This is just another one, all of the leases that we pay on our facilities at Auckland Airport is another, that’s almost doubled since we came into this airport.”

All of that was “putting a lot of pressure on the bottom line,” he said.

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