OPINIONPoliticsApril 29, 2024

Wellington City Council isn’t very good at owning an airport


If the council isn’t sure if it wants a bigger airport, it probably shouldn’t own hundreds of millions of dollars worth of airport shares. 

Any fan of a professional sports team, especially in the big-money US and European leagues, knows how much team success relies on the right owner. Good owners are ambitious, willing to invest in quality players and coaches, and have the right knowledge and temperament to take expert advice and make decisions. Bad owners are cheap, don’t care about winning, and don’t understand the sport, or worse – they think they know more than they do, and try to micromanage their coaches.

Wellington City Council is currently consulting on a proposal to sell its 34% stake in Wellington International Airport. It would use the proceeds of the sale (book value $278m, but the council thinks the real value could be closer to $500m), to create a perpetual investment fund, which would diversify WCC’s holdings, and help to address its insurance shortfall.

The council’s consultation document is mostly focused on what’s best for the council’s financial position. Unions Wellington is campaigning for the council to keep the shares, arguing it is a strategic asset and privatisation could lead to worse outcomes for workers and the climate. 

I’m a fan of Wellington. I want to see the city grow and prosper, and the airport is a critical part of that. Just like a professional sports team, I want to see it in the hands of owners who will put it in the best possible position to succeed.

It’s hard to overstate just how important the airport is to Wellington’s future economic growth. This is a city that grew up on the strength of its harbour. In the late 1800s and early 1900s, Wellington was the main trans-shipping port in New Zealand, processing enormous quantities of wool, cheese, butter and meat from agricultural areas and sending it across the world. 

But Wellington is no longer built on freight, it runs on information. Our highest-value exports are all based on knowledge and information; software, corporate services, video game and movie effects, science and research. The city’s value comes from people, not things, and the most efficient way to move people long distances is by plane. 

As an example of just how closely linked airports are to the wider city economy, a study by economist Jan Brueckner found a 10% increase in airport passengers generates a 1% increase in regional employment. In their book Aerotropolis: The Way We’ll Live Next, John Kasarda and Greg Lindsay argued airports will shape economic, business and urban development in the 21st century “as much as highways did in the 20th century, railroads in the 19th and seaports in the 18th.”

Wellington International Airport is built on just 110 hectares of land, compared to Auckland Airport’s 1,500 hectares and Christchurch’s 750. Extending the Wellington airport runway to enable larger planes and longer distance flights to Asia and the Americas should be a priority for Wellington, but it is difficult physically, financially and politically. 

This 2021 promotional shot captures the entirety of Wellington International Airport (Photo by Mark Tantrum/Wellington International Airport via Getty Images)

For my sins, I have committed myself to the lifelong purgatory of being a fan of the New Orleans Pelicans, an NBA team with a history defined more by heartbreak and injury than any kind of meaningful success. Back in 2011, when they were still called the Hornets, the team had a problem. Star player Chris Paul’s contract was running out, and it was clear he wasn’t going to re-sign. 

The team struck a deal to trade him to the Lakers for a decent package of veteran players and young talent. It didn’t quite make up for losing their star, but it was enough to keep the team competitive and make another playoff run. 

The Hornets didn’t have an owner. They were temporarily owned by the league itself while it arranged a sale process. In an unprecedented move, NBA commissioner David Stern vetoed the Chris Paul trade. The Hornets were forced to accept a considerably worse offer from the Clippers. The only explanation Stern ever gave for his veto was “basketball reasons”. Most fans believed Stern was concerned that adding Paul to the Lakers alongside Kobe Bryant would ruin the competitive balance of the league.

The problem was, Stern wasn’t fully invested in the Hornets. He had a competing interest in making the NBA an exciting product. Wellington City Council is in a similar situation. Its priorities are pulled in too many directions. 

Former NBA Commissioner David “WCC” Stern (Photo: Jeff Golden/Getty Images)

There are 15 city councillors, each with their own priorities and alliances. Some have climate concerns, others are aligned with community groups that are affected by airport activities. Very few have any real understanding of the airport business. The mayor sits on the airport board, but juggles a million other priorities and can never give it their full focus. In some cases, the council ends up stuck in an awkward position between its obligations to voters and its ownership of the airport. 

In 2021, councillor Tamatha Paul managed to cancel a $76m loan from the council to the airport for a seawall upgrade out of fear it might be used for a runway extension. That same year, a group of councillors brought a vote to officially oppose the airport expansion, after urging from community group Guardians of the Bay. It lost, but narrowly. Councillor Iona Pannett wanted to prevent the airport from expanding unless it reduced air traffic noise, improved air quality, and reduced carbon emissions. 

As well-intentioned as some of these efforts might be, it is terrible practice as a shareholder. The airport can’t even rely on its own owners to support its growth. Some councillors actively want the airport to shrink, which will hurt the wider city and regional economy.

It is true that an expanded runway and more long-haul flights will mean more carbon emissions, at least until hydrogen and electric planes are further developed. But the benefits of having direct flights to Asia and beyond are huge, and the risk of not doing it is even bigger. Without direct international flights, Wellington will continue to fall behind other Australasian cities. 

Despite some claims that selling the airport would mean WCC has less say in how it is run, it wouldn’t actually make much of a difference either way. The council is currently a minority owner with little influence over corporate decisions. Even if it were to sell, the council would still be responsible for any resource consents for new buildings and seawalls, noise regulations, and could bring an Environment Court case against the airport if necessary.

This is not necessarily an argument for privatisation. There is no clear evidence private ownership is inherently better for airports. According to a World Bank analysis, the 20 best-performing airports in the world are roughly evenly split between private, public, and public-private-partnerships. But there is one thing they all have in common: ownership groups that intensely, aggressively want their airports to become better-connected and more successful.

Can Wellington city councillors honestly say they are fully committed to a bigger, better, more financially successful airport? If the answer is no, the council is not the right owner.

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