Christchurch Airport — an enviable earner

Press, 14 July 1980, Page 16

Christchurch Airport — an enviable earner

Comment from the Capital

By

PHILIP WORTHINGTON

Christchurch airport, in common with almost all airports in New Zealand, is a “joint venture.” The concept is that of a partnership between the Government and the local bodies in the area that the airport serves. At a time when both Christchurch and Wellington are seeking improvements to their respective airports — and are both meeting a degree of reluctance from .the Government — and at a time when the Government has also decided to change the rules on its partners, the nature of these partnerships deserves scrutiny. On the last available figures (the Ministry of Transport report to March 31, last year), Christchurch Airport as a fixed asset is worth just under ,$12.3M. Of this sum. the capital has been subscribed almost

50-50 between the Government and the local bodies; the Government share is .$6. IM. that of the local authorities S6M. This approximate parity between partners’ contributions is fairly general for most of the two dozen joint venture airports in the country, with notable exceptions. One group of exceptions is a handful of secondary airports which have involved heavy development costs and are in areas with small fixed populations — Hokitika, Queenstown, and Masterton are to the foremost of this group. The other group is a group of two: the two other major airports in the country, Auckland and Wellington, which are the most appropriate for comparison with Christchurch. Wellington Airport as an

asset is put at almost 520.4 M, but here the Government has put up two-thirds of the cost and the local bodies only one-third (some $700,000 more than the Christchurch local bodies have contributed to their airport). Auckland airport is far and away the most substantial capital investment of the three and is worth almost S6OM. The Government’s — or tax-payer’s — contribution to this is more than three-quarters, .or 545.6 M.

It would be tempting to argue from these figures that the Christchurch local bodies had done proportionately more than their Auckland and Wellington counterparts in the provision of an airport. That would be true, but would ignore the substantial natural advantages that Christchurch has had in its airport site, and would ignore

also that airports are a necessary service in the nation’s transport system, no matter who pays for them.

Nevertheless, airports are also businesses: they are income-earning, they have funds for investment, and they require management. In this respect Christchurch is ahead of its northern competitors. Christchurch has set aside depreciation and other reserves of almost 54.5 M (Auckland, SS.BM, Wellington SIM). Christchurch has a further 54.5 M of reserve funds invested in stock (Auckland. S4.IM, Wellington. SI.4M).

As a money earner, Christchurch’s record is enviable. It costs less than Wellington to run but provides a higher return. The year’s operating costs for both airfield and terminal at Christchurch were $990,971. The return was $2,623,924.

By comparison, Wellington’s operating costs were $1,263,272 for a return of $2,161,548. Auckland cost $2,059,078 for a return of $5,440,049. When income from rental properties is taken into account (and the concomitant expenditure) we find that Christchurch provided a trading surplus of more than SI.BM on its $12.3M capital. Wellington provided just over STM on its $20.4M, and Auckland $3.6M on its S6OM. An accountant would have no hesitation in recommending the best investment. Naturally, Wellington interests will be quick to mention that some of the disparity in income between the Wellington and Christchurch airports is due to the trans-

Tasman services, which the lack of runway length prohibits Wellington from enjoying. In the last two financial years, trans-Tasman air freight from Christchurch increased bv 15.5 per cent, while the same traffic from Wellington showed a combined downturn of 13 per cent. (Auckland air freight to Australia increased in the same period by a staggering 73.8 per cent). Christchurch’s proposals to extend its runway would not require additional money to be raised. The money required is all available in the joint Government-airport authority pool account. That money must be spent on the development of Christchurch Airport and cannot be used for any other purpose. The' Government’s reluctance to pursue this course is based on the fact that no international carriers have yet committed themselves to using Christchurch as the sole point of entry or departure if the runway is extended. This would be hardly likely since the extensions would take some two years or more to complete, a long lead time for a commercial airline to make a promise such as the Government seeks.

The joint venture concept will become even more strained from April 1. next year, when the recently amended Civil Aviation Charges Regulations will come into effect.

Opposition members of Parliament have been campaigning to have this amendment dropped but have so far met with no success. Their last defeat occurred

last week when the statutes revision committee declined to review the regulations. Under the change, both Christchurch and Auckland will suffer a loss in their income, while Wellington will gain materially. Until now, all airports have received $2.15 of the landing charges — $5.75 on each 1000 kg of gross weight — and the Government has received $3.60. From next April, Christchurch will receive only $l, with the rest going to the Government. Wellington, on the other hand, will have its share of the landing charge increased to $3.15 with $2.60 going to the Government. The net result will be a reduction in income for

Christchurch's Airport Authority of about $570,000. In Auckland there will be a small increase in revenue for the local authority, somewhere about $90,000. and Wellington will have its income boosted by some $500,000. The reason for the change is to improve the return at Wellington on the capital invested there. As was shown above. Christchurch has the best rate of return of the three major airports and it is this success which marked it for the biggest Government “take.”

Although the Christchurch authority is continuing its campaign to reverse or at least lessen the impact of the amended regulations, and although Christchurch Opposition members of Parliament are equally active on the authority’s behalf. the Government appears quite set on the move and any change is most unlikely.