OPINION: Airport move – ‘the finances stack up’

Bird's eye. . . An aerial view of Queenstown Airport, looking towards Frankton and Lake Wakatipu.

YOURWORD: John Hilhorst

John Hilhorst is a former Wakatipu High School economics and social studies teacher, who’s lived in the resort since 1995

A ridiculous notion – relocating the airport would cost way too much! Figures ranging from one to two billion dollars were shot from the hip by people who should know. I’d thought as much myself, until I looked deeper.

Under its dual airport strategy, Queenstown Airport Corporation (QAC) proposes to rebuild pretty much everything from new, at both Queenstown and Wanaka Airports.

To accommodate the 5.1 million passenger movements planned for Queenstown, QAC proposes new facilities either to the north or the south of the existing runway. Plus it would need to buy 30ha additional land on Frankton Flats and the 40 homes its plan effectively makes uninhabitable. For the two million passenger movements planned for Wanaka, it proposes a new runway to take the weight of jet aircraft, plus a new terminus and other facilities, an investment of some $400m according to CEO Colin Keel.

This dual airport investment would be at least as much as the cost of a single relocated airport. So the significant difference is not their comparative costs, but how each could be funded.

Reinvestment of profits, new equity or debt are the only sources of funds available to the dual airport strategy. QAC’s annual profits ($14.9m in 2018) are completely inadequate to cover the hundreds of millions needed. New equity would be contentious, especially if it diluted council or community control. Debt is the main option available.

Contrast this with what’s possible for a relocated airport. In addition to all the sources of funds outlined above, QAC could sell its Frankton Flats land. What would this mean?

That depends on the value of the land. QAC’s 2018 Annual Report valued this at $207m, or $157 per sqm, well below the $1000 to $1500 per sqm that Frankton Flat developers currently face.

The airport site offers the most valuable greenfield land in the district. Realtors and developers estimate it at an average $1200 per sqm. On that basis, after putting aside 20 per cent of the land for reserves and roading, QAC’s land rezoned for development would be worth over $1.2 billion. That figure should make us all sit up and take notice. Yes, it would mean finding a new place for the airport and we know that wouldn’t be easy. But if we could, how would the finances pan out?

Farm sales in Otago these last three months averaged $1.67 per sqm ($16,879 per hectare). Developed dairy land, the most expensive, was $3.74 per sqm. Even if it took $20 million in legal fees, as suggested by Tim Brown, chair of Wellington International Airport [Otago Daily Times, May 4] the possibility of QAC gaining a suitable landholding with consents in place for a total cost under $50 million is real.

The two different approaches have vastly different financial outcomes. The dual airport option would result in two constrained sites unable to expand for wide-bodied jets, hundreds of millions of dollars of debt, duplicated operational costs, high interest costs, and constrained future financial and operational options. Plus duplicated overheads for all ancillary businesses. In contrast, a relocated airport would be paid for in cash with likely no debt and the possibility of released capital to shareholders. An extensive landholding would provide further development and rental income from the many ancillary business, adding financial robustness to QAC. All of which would provide many more future financial and operational options.

Relocating the airport, from a financial perspective, is a hands down winner.

QLDC is currently cap in hand to central government seeking funding for its one billion dollar transport plan and pushing for a bed tax to help fund the $374 million cost of services for visitors. Shouldn’t it at least investigate this opportunity – as 75 per cent owners of QAC – to release $1.2 billion of funding to save QAC from unnecessary, long-term, massive debt?

Other objections, like Kawarau Gorge traffic and resource consent difficulties, have been raised, but researching beyond the kneejerk ‘no’ shows these concerns are also not fatal flaws. Surely, as ratepayers, we should expect our council and the directors of QAC to at least give this some serious consideration?

See www.FlightPlan2050.co.nz.