Tired & weak arguments won’t help
Auckland International Airport Ltd chairman Wayne Boyd took the opportunity of the company’s annual result announcement to fire some more shots at the Commerce Commission over its examination — and findings — of airfield pricing issues.
The commission recommended price control of airfield services at Auckland in a 3-2 split decision on 1 August. The company disagrees with the recommendation, and outlined some of its proposed submissions.
It said correction of numerous arithmetic errors, alone, should reverse the recommendation for price control. The chief problem, though, is the commission majority’s decision to favour historic cost as a valuation method.
The company said it was well outdated and didn’t conform with currently acceptable valuation standards for infrastructure utilities in New Zealand and overseas.
Pushing that view of accounting seems a dangerous ploy for the airport company to adopt: witness the extinction of Andersen after it used what seemed the currently acceptable standard in the US, which was to employ entirely unethical methods to help large companies maintain false balance sheets.
However, looking particularly at the infrastructure sector, the airport company said that, if accepted, “the commission’s valuation approach would create huge anomalies with the manner in which other infrastructure industries (such as telecoms, electricity, gas & ports) are valued & regulated in New Zealand. Such an approach would also act as a serious disincentive for the future development of necessary infrastructure needed throughout New Zealand.
“The New Zealand Valuation & Property Standards Board believes that historic cost valuation methodology would be a significant backward step should valuers be asked to report values based on their historic cost and would result in meaningless balance sheets with significant discrepancy between competing industries.”
This argument, in itself, will do nothing to persuade the commission it’s wrong. What the commission will need convincing about is the ability with newer practices to prevent rorts, which were immediately evident when the electricity industry switched from old-style regulated business to various forms of different accounting.
Auckland International Airport also disagreed with the commission’s decision to exclude the land held for future runway development from the asset base for charging purposes.
“Even the airlines agree that this land has been purchased at the most economically efficient time. For shareholders to receive no return on this investment would create a perverse incentive for the company to sell the land and repurchase it at a later date at a greatly increased cost to the company and the airlines.
“The company is of the view that the significance of these & other issues may warrant judicial review of the commission’s report & recommendation.”
Story on the commission’s report: 3-2 vote for historic over optimised replacement cost at airport
This week’s result story: Travel growth to stay at 3-5%, says airport company