Respite for airport

Press, 17 March 1987, Page 14

Respite for airport

At the thirteenth hour the Government appears to have relented a little on its demand for $4.4 million from the reserve funds held by the Christchurch Airport Authority. The money was demanded peremptorily by the Government in January as part of its proposed change to the way in which the country’s main airports are administered. Last Sunday was fixed as the deadline for payment. As late as last Friday the Assistant Secretary for Transport, Mr Brian Lynch, reminded the authority that the money was due. After the deadline had passed, however, a message came from the Minister of Transport, Mr Prebble: the Government did not intend, for the present, to take the money after all. The Government’s apparent change of heart, although belated, is welcome. The steadfast opposition from the Christchurch City Council to the asset-stripping proposals has not been misplaced. The unanimous support from the South Island Local Bodies Association for the City Council’s stand also might have carried some weight; the commencement of legal proceedings to thwart the grab for reserve funds could not be ignored; but in all probability the temporary reprieve has as much to do with Auckland’s bitter resistance to being milked of part of its airport reserves as it has to do with the justness of Christchurch’s case. The political dangers for the Government in Auckland, had it pressed on with its plan, were too great. An accommodation was reached in Auckland which left the Government with little choice but to stay its hand in Christchurch too.

Encouraging though it is that the Government has paused for second thoughts, any applause would be premature. The Government has deferred its appropriating of the reserves — it has not abandoned all thought of doing so. The Auckland arrangement pivots on the creation of an airport company, to be run by an equal number of Government-appointed directors and directors appointed by the Auckland local bodies, from which dividends will be paid to both the Government and the 29 territorial local authorities that will be represented on the board. No such agreement has been made in Christchurch; nor is one likely under present circumstances. The Christchurch City Council, the Government’s partner in the joint venture that administers Christchurch International Airport at present, is opposed to the company proposal. The council would prefer a modified joint venture, an extension of the authority that has administered Christchurch’s airport successfully so far. A large part of the City Council’s opposition to the company plan is the Government’s insistence that the new company would have to buy the business and property of the airport at replacement cost, something more than $7O million.

Half of this money is intended to go to the Government and the other half would go to the Christchurch City Council. The council can see beyond the short-term advantage of this arrangement, however. The local community and airport users will come off second best. The Government and the

council, as joint partners in the airport, have contributed only about 9 per cent of the current book value of the airport’s fixed assets. The other 91 per cent has been provided by airport users. Under the Government’s plan, the people who have paid for the airport and built its value to what it is today — through taxes, through local body rates, and indirectly as airline passengers — are going to have to pay vastly more so that the Consolidated Fund may profit and the Government’s deficit be reduced.

The requirement on the infant company to buy the assets of the airport would saddle it with a heavy debt burden from the start. At the very least, the $35 million the Government intends to extract from the forced sale would have to be found from somewhere, presumably a long-term loan that will have to be serviced, and eventually repaid, from airport income. To meet this burden, and to meet the rate of return on its investment that the Government intends to take by way of dividend, airlines and travellers will be faced' with hefty fee increases. After all these deductions and after the payment of tax, the new company would have little enough to set aside for development. Worse, the charges would become a deterrent to airport business. The $4.4 million that the Government wanted is already earmarked for development. It will go into the $11.2 million interim stage of the 15-year, $2OO million planned development of the airport. From the interim stage the airport will gain a 40 per cent increase in the area available to international terminal as well as a lot of improvements to the domestic terminal. This sort of development can be regarded as being as satisfactory a form of dividend as a cash return.

A company whose prime purpose was to run a good airport — which is not necessarily the same thing as providing the Government with large amounts of extra income — would be no bad thing. If it were self-financing as far as possible, and if it provided for development while exhibiting a sense of social responsibility, who could complain? The point is that the present airport authority has gone a long way towards this already. Christchurch has a fine, efficient, and debtfree asset. It should not be forgotten that Christchurch Airport has not required capital from either the City Council or the Government since 1960. The city has an airport that is, in many ways, the envy of the rest of New Zealand.

In spite of the unequal revenue-sharing between airports, to the disadvantage of Christchurch, that was imposed by previous Governments, the Christchurch authority has been able to accumulate $l2 million in retained earnings for development and improvements without any reduction in the service it offers. What has it failed to do for airport users and the travelling public that a company would do? What would a company do better than the present authority has done already? The only answer put forward by the Government seems to be that the company would provide more money for the Government, which is scant comfort for airport users and travellers.