Costing the runway, and paying for it

airport runwway longer

Wellington.Scoop
“If the cost was $458m, it’s highly unlikely the project would proceed.”

This statement from Wellington’s new mayor may signal the beginning of the end for the city council’s support for extending the airport runway.

Mayor Justin Lester’s “highly unlikely” words were quoted by the DomPost this week after a consultant’s report released by the Regional Council specified $458million as the likely cost of the extension, a figure that was calculated using guidelines from the NZ Treasury and the UK Treasury.

The report was part of an assessment of the runway proposal which was published on the Regional Council’s website last Friday. Strange timing – one day before voting closed for the Wellington elections, and too late to be any part of the election debate.

The airport company has so far kept insisting that $300million will be the cost of building the longer runway.

Justin Lester had listed investing in the runway project as one of his election promises “to kickstart Wellington’s economy.” There were no caveats attached to this promise, though in one of his answers to our transport questions, his support for the project seemed to be less than a hundred per cent

I think the airport extension needs to be explored…There are some caveats: (1) the consent needs to be approved; (2) we need firm commitment from an airline; and (3) we need an appropriate finance structure and significant financial contributions from Wellington Airport, Central Government and the region’s territorial authorities (which they have already agreed in principle). For the project to proceed, the biggest issue is likely to be funding and we will need significant contributions from Wellington Airport and Central Government. Without these, the project is unlikely to proceed. The airport’s contribution would need to be far in excess of $50m for the project to proceed.

He wrote these words before the $458million figure became public.

The consultant’s cost estimate, with his explanation, is buried deep in this report on the Regional Council’s website. (It’s really time for our councils to publish such documents in a more accessible and user-friendly format.)

The consultant states that his estimate is “a more realistic view of the cost of the runway” than the figure that’s been repeated for years by the airport. But the airport continues to claim that its figure is right – in this morning’s DomPost the airport’s chief executive says the assessment by the council reviewer was not based on a best practice engineering analysis, nor did he consult the team that prepared the airport’s costings to ensure he properly understood how they were derived.

It’s not the first time that the airport’s $300million figure has been challenged.

Several weeks before the Regional Council report was released, Ian Apperley wrote that the true cost was contentious and suggested that it could be over a billion dollars. Ian added:

The mayoral candidates who have backed the airport really should have their heads examined. At the very least we should be wary of them. Why? Because if they’ve fallen for the sales job by WIAL, then they aren’t particularly business savvy. Research and analysis shows this is a white elephant in the making.

After the consultant’s $458m figure was published, that comparison was repeated by John Beckett, executive director of the Board of Airline Representatives, who told the DomPost: “We could end up with this investment being a big, white elephant.”

Richard Randerson​, co-chairman of Guardians of the Bays, said the latest estimate was no surprise, but the fact it had taken so long to appear in an official report was surprising. The $300m quote had been thrown around for years without being adjusted, despite earlier plans to extend the runway north being significantly different to what was now on the table.

“We’re very grateful that someone has, at last, sat down and done some clear thinking on this.”

Which is a challenge for Wellington’s new mayor. It seems he does not want a longer runway at any cost. It’s time to schedule a debate where the new council can specify that there are limits to its generosity.

Read also:
60 trucks every hour, five nights every week, to extend the runway

 

11 comments:

  1. Ross Clark, 15. October 2016, 4:16

    What is driving me spare about this project is that no-one can quantify the number of additional passengers, inbound and outbound, that this scheme will create over the ‘base-case’ of letting the current options be (or, as I have argued before, providing direct flights to the International Terminal at AKL while we wait for their domestic terminal to be rebuilt next to it).

    And this is coming from someone who likes aeroplanes …

     
  2. Henry Filth, 15. October 2016, 5:21

    $300 million, $458 million, any advance on $458 million, going once, going twice, sold to the Wellington ratepayers for only $654 million! A bargain at twice the price! Oh! Twice the price! Let’s have a technical issue! Onward and upward. A bargain at only $712 million! And for a mere hundred million more, we can connect it to the city with a. . . . a monorail!

     
  3. TrevorH, 15. October 2016, 8:52

    A bunch of deluded yokels with cosmopolitan pretensions totally beguiled by a streetwise investment fund whose purpose in life is to maximize its own value. Sad for any bystander to watch, and as a ratepayer it’s much worse because we have to pay the bill.

     
  4. Sandy, 16. October 2016, 1:32

    I find the release date of the report to be highly peculiar. Is it ok for a multi-national that supported our Mayor’s election campaign (see Infratil Chair Tim Brown’s appearance in his campaign video) to have seemingly impeded the democratic process by halting the resource consent process a few weeks before the election? Shouldn’t someone be asking some hard questions? I like Lindsay’s idea of an open debate. Hope they invite the Guardians!

     
  5. Geoff Advocate, 16. October 2016, 4:42

    Certainly, the longer the bickering by the naysayers, the bigger the eventual costs. This will lead to a win for the northern airport and their economy at the expense of beautiful Wellington. Wellington and the central region deserve far better. The million+ people in the region must support this vital project for many reasons. Some are:

    1. Support the Capital for your collective long-term benefit. The ROI WILL be realised,
    2. Singapore Airlines presence will deliver more overseas visitors. WLG will become “known” more widely as a result of their services. They intend to operate non-stop eventually as they grow the market. The extension has to be ready for that eventuality.
    3. A longer runway would add additional safety margin to all operations. Who wants to argue that fact? Aviation is only safe with good infrastructure.
    4. Look at other examples where runways have been extended. The benefits have been realised very quickly. Take Birmingham, Manchester, East Midlands as 3 examples. The numbers speak volumes. Check their recent histories!
    5. There would be an additional revenue margin as the airport would become more attractive for charter operators and more amenable as a diversion airport with a reasonable runway length.
    6. It is not a case of competing against AKL, rather, a complementary situation.
    7. Passenger growth forecasts are almost always conservative and would accelerate with better infrastructure and marketing of such.

    There are many more points, but in essence, get behind the proposal and keep costs down. It would be better now than later. Stop being dictated to by your far less attractive city up north! Work together as a community, please. Get on with it.

     
  6. Andrew, 16. October 2016, 8:42

    You sound like an angry Infratil shareholder!

     
  7. CC, 16. October 2016, 10:15

    Geoff – Being one who you would probably describe as a bickering naysayer, let’s start to unpick a few of your assertions – without name-calling. The door is also left open for others to provide objectively discredit the other questionable views you have expressed.
    To start, people would be more inclined to support the runway extension if Infratil could see the business sense in paying at least their share of the costs, or as Steven Joyce suggested, used their own extensive war chest to finance the project on its own instead of wanting tax-payer funding.
    Secondly, your Birmingham (NB…formerly Birmingham International Airport), Manchester (a base for low-cost carriers), East Midlands (a hub for low fare airlines) reference is also intriguing. In the NZ context, wouldn’t these be considered short-haul airports, with mainly budget airlines servicing hubs in the UK and Europe? Incidentally, Infratil failed to make a go of three airports, Lubeck in Germany and Prestwick and Manston in the UK that had similarities to the three you have listed.

     
  8. Public Money, 16. October 2016, 12:51

    I agree with you Henry, and I don’t mean to sound critical of your estimates, but did you include the $1million for the original feasibility study, the several million for the consent application, the $8million projected subsidy for Singapore flights, and the very poor paper trail?

    How can a consenting authority (WCC) be at least partly in charge of the decision making process when it is a joint applicant for the consent? The National Government were quick to fire E Can for “poor decision making.” Why doesn’t the Government put commissioners in charge of WCC for the council’s lack of transparency in theirs? The reason for selling Wellington Airport in the 90s was for the private stakeholder to take on the financial burden of the running costs and future investment. Why are we being asked to pay for it now? Why are these assets sold, then bailed out again and again, by rate and tax payers, who at the end of this merry go round are left with nothing but debt? Why do so many people have short memories? Why don’t people wake up?

     
  9. Henry Filth, 17. October 2016, 6:03

    Sorry, Public, I didn’t. I just assumed that the extras would pop up later, and that there was no point in mentioning them yet. It’d just upset people.

     
  10. Trish, 18. October 2016, 17:43

    Public: When the Government sold its 2/3 share of Wellington Airport, the Council hung onto its 1/3 share. They have minority seats on the Board. Infratil is not interested in investing in the extension because the income from landing fees will be microscopic. The business case is based on the theory that the benefit will fall across the wider region through more tourism, business, students, etc. But that does not explain why WCC ratepayers should pay – and we haven’t yet heard from Porirua, Kapiti, Hutt and Wairarapa ratepayers who will soon be asked to chip in.

    Here’s my suggestion: The 5 big hotels in Wellington form a Charitable Trust to build and own the extension. They would only need to each put $100m into the hat, and maybe solicit some other donations. And because it’s a donation to a charity for the benefit of the wider public, the government would give them 30% back. Win win. Brilliant!

     
  11. Public Money, 19. October 2016, 17:30

    Trish, your comments highlight why it was such a bad idea to privatise such a strategic public asset. The campaign to build an extension at Rongotai airport is being pushed by WIAL with some opaque decision making on behalf of the WCC for funding the majority of the application. A serious discussion on alternative sites for an international airport from a regional perspective has been denied because of this private company’s desire to expand its asset portfolio at our expense. This is why Infratil (the major shareholder in WIAL) is pushing for the extension the most. Over two thirds of Wellingtonians don’t want the extension, nor the negative environmental effects it would bring, and a strong economic case has not yet been provided. Hardly a win win whichever way you fund it.

     

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