OUR SUBMISSION TO THE WELLINGTON CITY COUNCIL’S ANNUAL PLAN

We have submitted the following to the WCC’s Annual Plan – as they were asking for ‘good ideas’ from the community of how to spend our money better. It may be largely lip-service, seeing the Council has gotten a lot of flak recently over their public ‘consultation’ (or lack thereof) processes, but we felt it was important to continue to engage with the Council and to use this democratic process. Dr Sea Rotmann, our Co-Chair spoke to the submission and Clive Anstey had also sent it round to every Councillor with a cover letter beforehand. Councillor Andy Foster, to his credit, replied with an immediate and thoughtful response, outlining the many caveats that would still need to be met before the Council would decide to spend the $90m that were already earmarked for this proposal in the Long Term Plan. He also spoke to Dr Rotmann and Mr Anstey during the break, which may have been a bit of a mistake: He told them that his mind was still completely open (good!) but that he wasn’t sure that emotions (on both sides) weren’t getting in the way of the facts (our main emotion is frustration that the airport’s ‘facts’ are Read More …

RE-BLOG Strathmore Park: Wellington Airport extension supporters suffering Polyannaism

For years now, Wellington International Airport and it’s pet monkey the Wellington City Council have been pushing for an airport extension. And for years now, it hasn’t stacked up. No small wonder when the New Zealand Institute of Economic Research (NZIER) and the Board of Airlines Representatives of New Zealand (BARNZ) slammed the business case that the Pollyanna Team had put together in support of the extension. The WCC has poured millions after millions into this project paying for reports that have been slammed every time they are produced. This airport extension does not stack up, for anyone, other than Infratil. Key Finding: the central scenario BCR of 1.7 is significantly over-stated. The reason that it stacks up for Infratil is that they, being in a monopoly position, can take profit based on square meterage. This is governed by the Commerce Commission. The more land they have the more profit they can take. It is no small wonder then that attempting to secure thousands of extra square meters, with the public paying far more than their fair share, is attractive. There are numerous gaps in the draft analysis. But the Council continues to support the extension despite the evidence showing Read More …

REBLOG Strathmore Park Blog: Singapore Airlines just saved Wellington $90m

News this week that Singapore Airlines will be flying “direct” from Wellington to Singapore via Canberra single-handedly proving that we don’t need a $300m plus runway extension to access Asia and saving the ratepayers the $90m that was looking earmarked for the project. Rejoice Wellington. In a Powerpoint Presentation written by what appears to be a PR Company engaged by the Wellington City Council, (WCC Presentation), the platitudes run thick and fast. Sadly, as usual, the propaganda is flowing in some places. “It proves that direct flights to Asia will be feasible.” Well, no, it proves that flights to Singapore via Canberra will be feasible right up until the point other competition enters the same market. Because right now Singapore Air gets the march on consumers wanting to fly to Asia, but once another airline starts the same route, the economics are likely to be stuffed proper. And Singapore Airlines are getting subsidised by the ratepayers it seems. In terms of direct flights to Asia, it really doesn’t prove anything. In fact, so far, the WCC and WIAL have single-handedly failed to explain how it will be economically viable. We already know that twenty airlines have said they wouldn’t use Read More …

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 …