Singapore here we come! As long as it is subsidised…

Yesterday, the Capital’s worst-kept secret has been confirmed: Singapore Airlines is starting a 4-day a week service from Wellington to Singapore via Canberra. But there are some pretty serious questions yet to be answered about how this miracle came about. The new ‘capital express’ service will begin in September, with seats going on sale on January 25. Return flights to Canberra will start from $587 and from $1808 for return flights from Wellington to Singapore return. Great, but right now you can book a 14h Qantas/Emirates flight from Wellington to Singapore via Sydney for NZ$1,044 return in September… You’re going to save a minimum of at least an hour and a half for every traveller and that’s a great benefit,” Wellington’s Deputy Mayor Justin Lester said at the signing ceremony. Yes, maybe via Auckland but not via Christchurch or Sydney… This is effectively a direct flight [to Singapore],” [Transport Minister Simon] Bridges said. Source Or… really not so much – it really is a Trans Tasman flight with a transit option to Singapore… This flight will indeed make up for some of the extra time spent in Auckland (calculated as an overly pessimistic up to 4h transit time by InterVISTAS), Read More …

REBLOG Keith Johnson: The business case for (or should that be against?) the Wellington runway extension

DOWN TO EARTH WITH A BUMP Everyone is slowly getting back to normality after the Christmas Holidays here in the Antipodes. The holidays are taken very seriously [or should I say ‘unseriously’], resulting both in substantial brain-fade during their duration and the build up of a toxic aversion to a return work among most citizens. Like many, I took work with me during my vacation and did virtually nothing. I had loaded the SELENA Spreadsheet Model on my hard drive. This had been supplied under an Official Information Request to the consulting group Sapere, via Wellington City Council. These Rascals used the Model to generate the numbers for the Report which they prepared for Wellington International Airport Limited [WIAL]: ‘Cost Benefit Analysis of the Proposed Runway Extension at Wellington International Airport’ [by Kieran Murray, John Wallace, Preston Davies – you naughty boys]. Fortunately, when I tried to test the scenarios and unlock the coding behind the Model, I was met with the instruction: ‘The cell or chart you are trying to change is protected and read only. To modify … you may be prompted for a password’. This allowed me to get back on the plonk and chill. However, I Read More …

REBLOG Croaking Cassandra: Further thoughts on the Wellington Airport Part 2

In my first post today, I posed some questions around the plausibility of the assumed increase in international travel into and out of New Zealand if the proposed Wellington airport runway extension was to proceed. In this post, I want to focus mainly on how the consultants have calculated the net national benefits from the runway extension. The Sapere cost-benefit analysis estimates net benefits to New Zealand from proceeding with the runway extension now of $2090 million (2015/16 dollars).  These results are summarised in Table 30 of the report.  Of these gains, just under half accrue to New Zealand users of the airport (in respect of both passenger and freight traffic) and just over half accrue to “other sections of the community”. Even if the passenger number assumptions are correct, the benefits to New Zealand users appear to be somewhat overstated, and the benefits to the rest of the community are largely non-existent. Take  the users first.    The main benefit to New Zealand users is the lower cost of travel.   Much of that is the cost of time.  The consultants have valued the time of New Zealand travellers using some standard values from an Australian Civil Aviation Safety Authority document, but Read More …

REBLOG Croaking Cassandra: Further thoughts on the airport Part 1

Shortly after the release of the cost-benefit analysis of the proposed Wellington airport runway extension, prepared by Sapere for Wellington International Airport Limited (WIAL) I wrote a post in which I posed the question “If they build it, what if no one comes?” Since that post, I’ve been to one of the open day/public consultation meetings, have read and thought about the documents more thoroughly, and have read various pieces written by others, including the new one by Ian Harrison that I linked to yesterday.  I have also had some engagement with Sapere and WIAL, which has helped to sharpen my sense of what the issues really are. The cost-benefit analysis is not a business case document.  It has been prepared in support of a resource consent application.  What I hadn’t known when I wrote earlier (and was advised of by Sapere) is that  under the RMA the applicants will need to be able to demonstrate national benefits to get permission to fill in some more of Lyall Bay, to extend the runway. I’m sure that the cost-benefit analysis is not serving as a business case for Infratil, the major shareholder in WIAL.  But since this project is generally accepted Read More …

A truly independent review of the Airport’s Cost Benefit Analysis

Ian Harrison, a highly respected  Principal economist from Tailrisk Economics, has released a truly independent (i.e. not paid for or commissioned by any Party involved in the runway extension) review of the Cost-Benefit Analysis. It really is worth a read. To quote from his Executive Summary: Recently, the Wellington International Airport Company released a cost benefit analysis of the airport long-haul capability extension proposal that purports to show that the economic benefits are $2,090 million, and are 6.8 times the capital cost. However, the benefits appear to be substantially overstated and are driven by projections of long-haul passenger numbers that are not credible, and favourable assumptions that boost the subsequent benefits for New Zealand. In critical markets high growth rates have been trended forward without regard to convergence to higher income country norms, and no regard has been given to the prospect of global warming policy initiatives designed to slow air traffic growth. A more realistic assessment of the project would show much lower and possibly negative net benefits. It appears that one of the purposes of the report is to make a case for central and local funding of the airport extension. Putting in public money to secure benefits Read More …

OPINION Dom Post: Wellington Airport’s runway extension plan struggles to pass the sniff test

PATTRICK SMELLIE Last updated 12:50, December 3 2015 ANDREW GORRIE/FAIRFAX NZ   While there may be 679 long-haul passengers leaving and arriving in Wellington every day already – enough to fill nearly three planes – how many are heading to the same long-haul destinations? OPINION: Running an airline is still one of the hardest ways to make a profit. IATA, the international aviation body, predicts total profits for the global industry of US$29.3 billion in 2015. Sure, that sounds like a big number, but it represents a return on capital of just 4 per cent – only slightly better than the feeble returns offered by bank deposits. Averaged across every airline, the average profit sums out at a measly US$8.27 per passenger, according to IATA director general Tony Tyler. That’s the trouble with impressive-sounding numbers. They can seem less impressive once you break them down. A good local example: the $2b benefit New Zealand might expect from extending the Wellington airport runway. That’s a $2 billion benefit over 40 years, or an average annual benefit of $50 million. That’s not to be sneezed at, but it’s a more meaningful figure against which to place the many risks of a $300 million Read More …

REBLOG Keith Johnson: Why can’t WIAL pay for the proposed runway extension?

BBC AND BBBC I was sort of retained as an ‘economist’ by the Guardians of the Bays ginger group that has been formed to contest the Wellington Airport Runway Extension Project – with our tiger-lady organizer Dr Sea Rotmann setting me to tackle the Notorious Business Case that has been recently developed by the consulting group Sapere. Now this ‘Master Tigress’ is a true ‘Legend of Awesomeness’ – and I quail before the obvious competencies and extreme activism of Sea and her very talented team of volunteers. Is there anything much that I can add to what they are already tabling? Yes – I think that there is. I’ll try to be a little bit more technical and focussed in my critique of assumptions and methods regarding the Sapere Report – mounting an economist-to-economist ‘Keep the Bastards Honest’ critique. In this article, I’ll concentrate on a simple question: ‘Why can’t Wellington International Airport Ltd [WIAL] pay for the proposed extension itself?’ Surely, this question is the central issue that should be addressed by the Sapere Business Case? Well I have to start by saying that Cost-Benefit Analysis in New Zealand is a swamp, with there being a distinct lack of Read More …

NEWS: Longer Runway not Plane Sailing

By Bernard Hickey 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 Read More …

OPINION Dave Armstrong: Dave Armstrong: Project Runway wild gamble without an airline

Hallelujah! After growing opposition from surfers, Moa Point greenies and airline pilots, the airport runway extension is taking off thanks to the latest report commissioned by, wait for it, the airport. Did you know that for every dollar we invest in the runway extension we could get up to possibly maybe perhaps seven back? It’s a no-brainer! That’s what the expensive full-page newspaper advertisement asking for feedback, led by a Clark Kent lookalike who could be any of the many designers and coders who do PR for the airport, implies. With a Phoenix player, a craft beer hipster and a film wanker in their ranks, these trendy superheroes could fly us into the next century, via the runway extension, supported only by a hefty ratepayer handout to pay for the million cubic tonnes of dirt. That’s because the government, private investors and Air New Zealand don’t want a cubic millimetre of it. Apparently there’s not much profit in the extended runway for the airport company – it only wants it for our own good. When news broke of the latest report, apart from being amazed by the number of times the words ‘could’ and ‘may’ were used, I was impressed Read More …

REBLOG Croaking Cassandra: What if they build it and no one comes?

A throwaway line of mine a couple of weeks ago about the Wellington City Council’s enthusiasm for the proposed airport runway extension prompted a couple of comments here from Tim Brown, chair of Wellington International Airport Limited (WIAL) –  owned 66 per cent by Infratil and 34 per cent by the Wellington City Council.  As I noted in response to Tim, I was predisposed to be sceptical about the proposal, but would be keen to see the analysis when it was published. This week a swathe of reports was released, including a cost-benefit analysis prepared for WIAL by Sapere Research Group.  The Dominion-Post led with talk of $2000 million of benefits for an investment of $300 million or so, suggesting that there really shouldn’t need to be much further debate about the economic merits of the proposal. But, of course, any cost-benefit anaIysis is only a reflection of the assumptions fed into it.   So I spent some time yesterday reading the report.  I had a few questions and observations, and was left unpersuaded that this was a proposal that either my rates or my taxes should be used to fund.  Quite possibly, this proposal could offer even worse value than Read More …