Wellington Airport stake gives city a say in its decisions

Wednesday, 9 May 2018

Wellington Airport: If the city council were to sell its stake in the airport company, it would lose its two representatives on the six-person airport board, and therefore any voice in its decisions, the writers say.

OPINION: Wellington Chamber of Commerce has proposed that Wellington City Council sell its 34 per cent stake in the city's airport, using the proceeds to pay off debt.

It was suggested the sale might raise up to $475 million, which at first glance makes the proposal appealing.

However, a closer look at the situation reveals the city council has a rare community and commercial asset through its share of the airport and selling it would be naïve strategically and economically.

Wellington International Airport is a crucial cog in the region's transport infrastructure and Wellington's ratepayers would suffer if it was sold.

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Firstly, if the city council sold its share of the assets it would lose its two representatives on the six-person airport board, and therefore any voice in its decisions. This is an important consideration – airports are commercially driven, whereas the city council is community focused.

It is important for the Wellington region that the city council continues to have a say in airport decision-making.

As things are now, Wellington City Council (WCC) has total transparency as to the airport's operations, finances and strategy, and the airport is informed about community and civic developments.

The airport and the city council co-operate on a raft of initiatives to facilitate and encourage air services, provide support for new services and market the region to tourists.

It is telling that Christchurch City owns 75 per cent of its airport, Dunedin City 50 per cent and Auckland Council 22.4 per cent.

Tim Brown, chairman of Wellington International Airport Ltd.

Secondly, WCC's financial position is extremely strong. Its debt-to-income ratio is significantly lower than those of Auckland, Christchurch and Tauranga city councils and WCC holds investments exceeding $400m.

To put the council's financial position in a residential context, it has a house worth $600,000 with a mortgage of $160,000. On the basis of this strong platform, it has the ability to invest in the city.

According to Standard & Poor's, WCC has the highest credit rating for a council in New Zealand and would be ranked higher than central government if it was technically possible for a council to be ranked higher than a sovereign state.

Thirdly, in addition to its regional infrastructure and community importance, Wellington Airport has proven over time to provide a solid investment return.

Between 2006 and 2017, the council received $146m in dividend payments and annual dividends are estimated to increase to $18.3m by 2028.

Since 1998 the value of the council's ownership has increased almost twenty-fold, even when excluding dividends, based on the council's valuation of the original 1998 shareholding of $24.5m.

Finally, when considering future value, it's important to note six million people a year pass through Wellington Airport.

By 2030, when the airport will have finished its programmed development spend of $450m, annual numbers through the airport are expected to grow to 15 million, which will increase the airport's value significantly.

Selling the airport would leave ratepayers waving goodbye to their stake in the region's core infrastructure and ratepayers and the Wellington region would be the losers.

Justin Lester is the Wellington Mayor and Tim Brown is chairman of Wellington International Airport Ltd.