Saturday, November 28, 2015

Bernard Hickey: Longer runway not plane sailing

As a Wellingtonian, I would love a runway that permits direct flights to Asia and the US.

It would save me schlepping up to Auckland and walking the gauntlet through the carparks to the international terminal.

It could encourage more direct international tourism and boost demand for foreign education.

And what I'd love more than a fancier airport is the sort of house price inflation that Auckland gets from all those tourists, students and foreign buyers of houses.

I'm frustrated at living in a "dying city" - as the PM famously called it - where house prices have risen 3 per cent in six years while Auckland's rose 83 per cent.

Even John Key acknowledged in August others would like to see Auckland-style foreign visitor and investor joy in their cities. So it's no wonder Wellingtonians would like to juice up economic growth with Government help.

This week, Wellington Airport detailed its case for a 354m runway extension. It would cost around $300 million and generate about $2 billion net benefits. In theory, it would allow long-haul 787 and A350 planes to fly direct from Asia and North America, although there is vagueness about whether planes could fly to Vancouver, San Francisco, Beijing or Tokyo. Pilots also have doubts whether these fully laden planes can safely fly in and out of Wellington.

But the catch is that the airport - 34 per cent owned by Wellington Council and 66 per cent per cent owned by listed infrastructure investor Infratil - would like the Wellington region's councils to put up $150m. The rest would be paid for by the airport and the Government, which means taxpayers.

The airport's logic seems compelling. If an extra dollar is spent and it returns $7 to the nation then taxpayers and Government benefit.

But it depends on whether the flights would come. Wellington may be New Zealand's most popular destination for local tourists, but foreigners tend to ignore it.

Without a Lord of the Rings museum, snow-capped mountains or a fancy casino, Wellington seems a bit off the beaten track. There is a hefty batch of chickens and eggs in this debate, but the lack of entertainment for foreigners can't be ignored.

Wellington's ratepayers should chat to politicians in Invercargill, Rotorua, Hamilton and Canberra, who spent millions on the promise of direct international flights, to see them dry up and go away or never arrive. The fallout if the airlines don't come would be significant.

The airport would have to increase landing charges for domestic travelers. Prices could increase by $10 a ticket to pay for the airport's share of the $300m investment. Ratepayers and taxpayers would be out of pocket.

The Government was skeptical, arguing if the business case was so strong, Infratil and the council should stump up all the money.

The extension is a risk and it may be a risk worth taking. But it's a risk informed shareholders should take, rather than ratepayers and taxpayers.

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