That Airport Extension: More optimism bias, less facts and is the extension enough for long-haul planes to land?

A corporate finance partner at Deloitte writes in the Dominion Post this week a rhetorical question to which they clearly think they know the answer. “Should Wellington consider an extension to its runway?” What is interesting about this is that the opinion shows further optimism bias coupled with some facts that are incorrect and the comments are the majority in the negative.

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I’ve written about this recently, and find it fascinating. What we have on one hand is what appear to a small-minority of people that think that an airport extension will dig us out of an economic hole and make us all fabulously wealth, to be funded by we the people, pouring cash into a private company.

The current state of play is that the City Council has agreed to put aside $90 million for an extension if the business case stacks up, the resource consent is approved, AND that a long-haul airline is committed.

Let’s look at the latest opinion.

Anyone who has lived in Wellington will confirm that the idea of direct long haul flights has significant appeal.  Of course there are plenty of flights available across the Tasman but for some reason they all depart before 7am and arrive back at midnight.

Yes. A longer runway wouldn’t change this. It’s the way that the worlds airlines move that means we either leave or return very early in the morning or rather late in the evening. There are a few exceptions. Inferring that we would be able to get “gentleman’s hours” flights by spending hundreds of millions of dollars is a little bit silly.

Furthermore the planes operating out of Wellington to cross the Tasman are small and relatively slow.

This infers that by extending the airport we’ll be able to fly internationally faster. Sadly, the new wide bodied aircraft that a long haul route demand, including the Dreamliner, are the same speed, or slower. There is no speed increase.

Interestingly, flight specifications for the Dreamliner demand a runway that is 10,300 feet long (3,139 meters), and the extension will only take us out to 2,300 meters. Other wide-bodied aircraft are similar. That extra 300 meters isn’t going to give us much at all. We could of course not load the planes as heavily, with people and fuel, in order to reach those long-haul destinations, but then, the economics get twisted and there must be a break point where they can’t take on enough fuel, factoring in the length of the runway, to actually reach those destinations.

On top of that, 300 meters of dirt doesn’t cut it. Terminals and aprons will have to be reconfigured for planes. At peak times there are already planes queuing for gates.

As New Zealand’s second largest urban centre and economy with over 430,000 people living in the four cities and the commuter belt townships of the Kapiti Coast, Wellington needs to play a key part in the future success of New Zealand; including taking some of the pressure off Auckland. In this light, it seems incongruous that Wellington does not have a genuine international airport.

Strange… I thought we did have an international airport? I’ve flown to Australia and the islands from Wellington on dozens of occasions…

The people who live and work in Wellington are for the most part a highly educated bunch, with relatively higher disposable incomes than almost anywhere else in New Zealand. Many are employed in delivering professional, financial and technology-based services.  The net result is a population with a strong appetite for travel, both for work and for leisure.

That may be true, but no evidence is provided to support this view. One of the things that we see in high-tech industries, in which I have worked for over two-decades, is a reduction in travel. I can work with customers all over the world without getting on a plane, let alone leaving my office to commute to the city.

In the meantime what does seem clear is that Wellington is under-performing on a number of measures where it is likely that greater international accessibility would make a real difference. The most notable are attracting its fair share of the international student market, increasing the number of international tourists and generating meaningful job creation through business start-ups.

OK.

Wellington only captures around 6 per cent of the international student market, despite housing two highly regarded universities, two good polytechs and a Le Cordon Bleu cuisine school.

Inferring that a long-haul route would bring in more. This has been proven untrue. IF a long-haul route is there, then it will be used, but remember, these are short-burst periods. International students don’t travel back and forward each week, they probably will do it once or twice a year.

Only 7 per cent of international visitors to New Zealand spend time in Wellington, notwithstanding its justified “coolest little capital city” profile.

That’s because the existing airline and tourism industry has created a northern gateway at Auckland and tourists flow down the country to the south. The reason they don’t come to Wellington is not an airport, its because we aren’t marketing our city as a tourist destination hard enough.

Population growth is stagnating due in part to relatively low rates of job creation, forcing students, for example, to leave Wellington after they graduate.  And it seems likely that a contributing factor is that businesses that value international connectedness choose locations other than Wellington as their home.

This infers that we can reverse that trend by buying 300 meters more of dirt. The reason that the city is stagnating is because this government has set its sights on Auckland and Christchurch and done absolutely nothing for Wellington. The reason we are stagnating is because the WCC and other regional Councils don’t seem to be able to agree on any future investment on pretty much anything.

Let’s not forget when you look at Wellington statistically, this has kind of been this way for the last four decades. Rates of growth here are very small, very government (who’s in) dependent, and very tied to immigration.

Reading the articles comments, what is noticeable is that more than eighty percent of the comments are opposed or asking to see the figures, or asking why it is that we are paying for a private venture.

I’m more than happy for an extension, but fail to understand if it’s such a great spend/investment, then why are the ratepayers having to stump up ??

Comment

It’s a good question.

Here’s hoping that neither Deloitte, nor Pricewaterhouse, nor any other consulting firm that is showing what appears, in my opinion, to be bias, are engaged to write the mythical business case.

If they are, then we are likely to have a great deal of optimism bias.

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