Handle with Care- the Case for the Wellington Runway Extension

Like many, I was initially enthusiastic about the idea of direct flights from Wellington to somewhere in Asia. After all, who hasn’t arrived back from a long haul flight to Auckland inwardly groaning at the thought of checking through customs, grabbing baggage and having to transfer to the domestic terminal for yet more waiting, before an eventual trip home?

However, as I started to dig deeper, some disconcerting facts emerged. For example, media reports that the Commerce Commission has recently taken an interest in Wellington Airport’s future ability to make profits. So what is going on?

Reading the Infratil and WIAL (Wellington International Airport Limited) 2013 annual reports, I found that the airport assets are currently valued at around $800 million. Wellington City has a 34% stake in the airport, so we collectively own $270 million or so of airport assets.  WIAL as a whole made a 6.23% return on investment, well under the maximum of 8% allowed by the Commerce Commission.  So far, so good.

But hold on. Wellington City received an annual dividend of $8.8 million for its 34% stake in the airport. Sounds like a lot, until you realize it’s only a 3.3% return.

 The Infratil 2013 annual report however (see page 12) , records a surplus for Infratil from the airport of $39 million for their 66 % stake.  Am I wrong in thinking there is some imbalance here?

I think there are some fairly big questions to be asked here before we as a city go rushing into giving away our land and sea, changing the face of Evan’s Bay, spending a cool $200 million (which will add half again to our debt), also adding value to the airport assets, which will mean landing fees and other charges can increase (Commerce Commission rules), and all of this only balanced by our dividend from WIAL, and some yet to be quantified wider economic benefits.

I’m not saying it shouldn’t ever happen- just that in my view we need to be cautious.