The Register: What will the Wellington airport runway extension do for business owners?


Advocates are touting the Wellington Airport extension as a plan that will bring in millions of dollars of economic benefits for the region. However, it also has its detractors – the Board of Airline Representatives New Zealand (BARNZ) has cast doubt on these claims. Can retailers expect more sales if this comes to fruition?

The proposal to extend Wellington Airport’s runway is part of the Wellington Council’s 10-year plan.

International air connections were listed as part of its “eight big ideas” for economic growth in its long-term strategy.

The council says a runway that’s 300 metres longer could allow for much bigger planes coming from Asia and other overseas countries that don’t fly to Wellington directly.

“The benefits to Wellington will be immense.  Direct flights to an Asian hub would service a particular end point destination and would feed into wider networks in Asia and on to Europe, Africa and the Middle East. These improved linkages would flow into increased cross border business, expanded trade and investment, greater visitor numbers, as well as more convenience for travellers. Most importantly they would improve the attractiveness of Wellington as a place to live and do business in,” the Wellington Employers’ Chamber of Commerce said in a statement.

The council has also agreed to fund up to $90 million of the possible $300 million bill.

The benefits of the extension were backed up by a report prepared by Ernst & Young (EY) that assessed the economic benefits.

EY found that there would be $1.7 billion in direct economic benefit to New Zealand in the next 40 years.

For Wellington specifically, it found there would be $684 million in economic benefits over 40 years.

But no matter what the report’s findings, the buck stops with airlines.

In the end, it’s a commercial decision whether they fly there or not, and BARNZ doesn’t give the extension plans a vote of confidence.

BARNZ said in a submission to the council the economic impact assessment by EY overstates the benefits of the extension while overlooking the costs associated with it.

It raised the question of whether tourists would actually want to land in Wellington as their first point of contact, as it requires a “figure of eight” to explore the country, rather than starting in Auckland and working their way down.

It also questioned the idea that people would wait 48 hours to catch a direct flight rather than adding a stopover in Auckland or Australia.

BARNZ executive director John Beckett said cost benefits need to be thoroughly analysed.

“Wellington’s wanting to boost itself, and if it’s got $300 million to do that, there could well be better ways to spend it than on the runway extension.”

Infometrics senior economist Benje Patterson says if the runway is extended, there will only be a minor effect on retail spending.

“Wellington is much more orientated towards domestic tourism rather than tourism generated by international visitors,” Patterson says.

He says in the March 2014 year, there was almost $1.3 billion dollars spent by New Zealand tourists in the region, versus $470 million spent by foreign visitors.

This equates to 73 percent spending by domestic visitors and 27 percent spending by international visitors.

International spend in Wellington pales compared to a tourism hotspot like Queenstown, where 70 percent of spending is international and 30 percent is domestic.

“Domestic visitors spend a lot more, so it casts further doubt as to whether the runway extension itself would generate more international activity,” Patterson says.

“Even if there was reasonable growth, it would be a drop in the bucket for growth retailers in the Wellington region. It will have an effect, but it wouldn’t be significant.”

He says Wellington Airport is a massive hub for domestic flights, but not many international visitors fly into Wellington as their sole destination.

“With mid-tier cities, the reality is you can sustain long-haul flights but you probably can’t sustain them with a high enough frequency.”

Westpac senior economist Felix Delbrück echoes this.

He says the extension has the potential to bring large economic benefits if successful, but most studies to date have assumed Wellington could attract airlines to operate long-haul flights in the region.

“That’s where questions arise – direct routes via a hub in Asia, or possibly North America, may aid the public sector in its dealings with major trading partners and reduce demand through Auckland, but will this be sufficient to justify regular scheduled flights?”

Delbrück says in order to be confident in the potential economic benefits, there needs to be a clear plan to attract business and leisure travellers, an analysis on where demand would come from and why, as well as some concrete commitments by airlines.

3 News reports that Wellington Airport chief executive Steve Sanderson says the criticisms of the extension are premature and there’s a lot of work to be done before a final decision.

He said the airport was deliberately taking a “slow, careful approach” and not rushing the plans.

The next step the council and Wellington Airport are taking is a consultation process, before lodging resource consent with a 15-year timeframe.

They will then commit to a more in-depth economic impact assessment.