Shareholder-activist critical of Auckland Council decision-making on airport stake

Wednesday, 15 April 2020

Auckland International Airport has turned into a ghost town as flights in and out of New Zealand grind to a halt.

A shareholder-activist says Auckland Council has made a costly blunder in not maintaining the size of its stake in Auckland airport.

Council chief executive Stephen Town and Mayor Phil Goff decided ratepayers would not take part in a rapid capital-raising by the Covid-19-hit airport company, in which the city had held a 22.4 per cent stake.

Air New Zealand aircraft with engines covered parked up at Auckland Airport during Covid-19 lockdown

Councillors were not consulted, the council's shareholding has fallen to around 19 per cent, and Melbourne-based Stephen Mayne believes ratepayers are already nearly $70 million worse off.

The council had 24 hours to decide whether to take part in a $1 billion capital-raising by Auckland International Airport, which is bolstering its cash reserves as it re-trenches due to the near-evaporation of air travel.

Passengers arriving back into New Zealand at Auckland International arrival terminal after the PM closed the borders.

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Major investors swamped the offer of shares at a discount to their already-reduced price, with the capital-raising closing over-subscribed.

Goff told RNZ on April 7 the council would not take part in the capital-raising, and acknowledged the city's shareholding would reduce.

Mayne, the Australian shareholder-activist, wrote to all councillors on Friday after learning the council would not maintain its shareholding, but found no politicians had been consulted.

'Instead, the Labour mayor Phil Goff and CEO Stephen Town made the call between them and the council has now been diluted to below 20 per cent of the airport,' wrote Mayne in an online column for Eureka Report, and Crikey.com.au.

The airport shareholding is the council's biggest financial investment, and dividends have been important revenue with a forecast $58m payment into council coffers this year, before coronavirus struck, and the airport suspended dividend payments.

Mayne is a former chair of Melbourne City Council's Finance and Governance committee, and a freelance journalist. He is not a major share investor and has sat on the board of Australia's Shareholders' Association, advocating in the interests of mainly smaller investors.

'The mayor and CEO were wrong to make this decision under delegation,' Mayne told Stuff.

Goff was not available for comment on Wednesday, and the council has yet to respond to Stuff's questions on the decision.

The capital raising would have required the council to put a further $250m into the airport, and Mayne said there were ways it could have done this if its cash reserves were tight, and it could have onsold some shares.

Investors were sold shares at $4.66, and by mid-afternoon on Wednesday they had risen to $5.98 with settlement not due until May 1.

'Ratepayers should be angry about $AUD65 million (about $70 million) in lost profits,' said Mayne reflecting on the price rise.

Mayne was also critical of the airport's board for not having consulted with its biggest shareholder about the imminent capital raising.

He said there were still mechanisms for the council to demand an opportunity to maintain its former shareholding, even if it needed time to make a decision.

Auckland Councillor Chris Darby, one of 21 contacted by Mayne last week, has asked for the issue to be raised as Extraordinary Business at Thursday's scheduled council meeting of the council's Emergency Committee.

One of Auckland Council's long-standing formal strategies for its airport shareholding is to 'maintain its level of ownership where this does not require additional investment.'