By Navya Mittal and Lucy Craymer
WELLINGTON (Reuters) - New Zealand's Auckland International Airport (AIA), the country's biggest, said on Thursday it would raise airline charges over the next five years, in a move opposed by major users Air New Zealand and Qantas Airways.
The airlines said it would likely lead to higher ticket prices making travel unaffordable, but the airport operator countered the carriers were reporting strong profits.
Air New Zealand had on Thursday upgraded its full-year earnings guidance for the fiscal year ending June 30 for the second time on the back of strong demand and lower jet fuel prices. The airline, however, warned fares were likely to moderate in the following fiscal year.
The revised airline charges will be effective from July 1, the airport operator said, ending a year-long fee freeze as it looks to fund NZ$3.9 billion ($2.36 billion) of improvements over the next five to six years.
Under the new charges, domestic jet fees and international fees will average NZ$11.85 and NZ$37.35 per passenger over the five years of the price changes, respectively, up from NZ$6.75 and NZ$23.40 currently.
Air New Zealand and Qantas said they wanted the airport to scale down its costly development plans, which include replacing the existing domestic terminal, to keep charges lower.
"Airlines accept that investment is needed, but what (AIA) is proposing goes far beyond what is needed or affordable," Qantas (ASX:QAN) CEO Alan Joyce said in a statement.
The airport, however, rejected "any claims that the infrastructure investment will hurt the travel market", an AIA 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," the spokesperson added.
Board of Airline Representatives of New Zealand (BARNZ), a trade body with 28 airlines as its members, pointed to AIA's "underinvestment" over the years and regulation that "incentivises" investments in commercial property, hotels, and returns from retail shops at the airport.
"BARNZ has given feedback to AIAL that the spend proposed is inefficient, and should be reconsidered," said Cath O'Brien, executive director, raising concerns over impact on demand if AIA becomes the most expensive airport in the region.
AIA declined to comment specifically on BARNZ's claims.
The raised charges come as Auckland's mayor pushes for the sale of at least part of the council's 18.1% stake in the airport, worth NZ$2.2 billion based on current market prices.
Auckland Council members late on Thursday delayed a decision on the sale until at least Friday.
($1 = 1.6562 New Zealand dollars)