An announcement today that Singapore Airlines has canned its route to Canberra is a stark admission that there is not enough demand for international flights out of Wellington, say those concerned about the ongoing spending of ratepayer and taxpayer money on the venture.

Guardians of the Bays, representing more than 600 community and ratepayer organisations and concerned individuals, is concerned that public money has been used to subsidise the route despite it being obvious for some time that it was not successful.

Guardians of the Bays Co-Chair Richard Randerson said it was no surprise that Singapore Airlines was pulling the plug on the Wellington – Canberra – Singapore route.

Despite spending at least $3 million dollars of ratepayer money to promote the route, publicly available loading data clearly shows that the route achieved less than a 50 percent passenger loading. That is great if you like lots of seats on your plane, but it isn’t great for ratepayers who have been subsidising this route for more than a year – for no discernible benefit. Canberra has a similar-sized population to Wellington, and if Canberra cannot muster a payload, it is unlikely Wellington can do anything better.

Latest figures from international monitoring sites show the much touted Capital Express – or Wellington to Canberra flights – have not been working. The latest figures from the Australian Government’s Department of Infrastructure and Regional Development show that in August 2017, the Singapore Airlines Wellington to Canberra flight had an average passenger load factor of 128 passengers per flight (based on 16 return services). That is a load factor of 48 percent.

Further figures show that international passenger traffic at Wellington Airport was up only 1.9 percent in the 12 months to September 2017, with Australian visitors actually down 2.2 percent in the same period.

Wellington Airport has tried desperately to stack up its claims that there will be an economic benefit from the proposed airport extension for Wellington without success. It has drawn down significant amounts of ratepayer funding for its Environment Court application and for the Singapore Airlines subsidy and promotion.

“There is already evidence that the proposal is likely to cost much more than the $350m originally suggested, up to $500m according to one expert.

“The proposed airport extension is not about what is good for Wellington. It is about what is good for Wellington Airport and its multi-billion dollar owner Infratil.

Co-chair Dr Sea Rotmann said it was time for the Mayor and Councillors of Wellington City to cut their losses on the proposed airport extension and move on.

In a meeting with Wellington Mayor Justin Lester, shortly after he was elected last year, he was clear that the Council’s support of the Wellington Airport extension was dependent on demand for the route.

This change of route proves that Wellington Airport and Singapore Airlines are scrambling to find a route that works economically.  It is a shame that Singapore Airlines has got caught up in this debacle as it has an excellent brand but appears to have been captured by vested interests.

“It is time for our community leaders to follow the Government’s lead and focus on spending that improves the lives of Wellingtonians and all New Zealanders, not just the few,” she said.

Original article here.

OPINION:  Last week, the umpteenth repeat of the famous Fawlty Towers ”Germans” episode was playing on my TV. Despite having seen it countless times, I had to stop and watch a hilariously concussed, goose-stepping John Cleese say “don’t mention the war” in front of tearful Germans.

This reminded me of our present Wellington City Council, where the rule seems to be “don’t mention the airport runway extension”.

The issue was a major one last term. Never mind that extending the runway would greatly increase greenhouse emissions, our Green mayor got right behind it. And despite the airport extension arguably being corporate welfare, the Labour deputy mayor, and now our present mayor, strongly supported it, too.

Council chief executive Kevin Lavery was also a big fan, naming the runway extension in early 2016 – along with the Film Museum and Convention Centre, which also seems to be in a state of limbo – as an area in which he wanted to make “real progress”.

Lavery and mayor Justin Lester were also involved in brokering the “Capital Express” route deal, which saw Singapore Airlines fly from Singapore to Canberra to Wellington, and receive a nice council subsidy in the process.

Surely if a direct flight from Singapore was successful then that would show that a runway extension would bring even bigger planes and more tourists to enjoy Te Papa, the cable car and the Wellington Seve … oops.

With the regular exception of councillors Sarah Free, David Lee and Helene Ritchie, the council agreed to support extension plans and fund a feasibility study.

But during the mayoral campaign some leopards changed their spots. After initially supporting the extension, Nicola Young did more research and came out against it. Even runway-friendly councillor Jo Coughlan questioned the deal. There seemed little public appetite for the extension.

Yet since election day, we have heard very little about the extension from councillors. Has our mayor been going around in a Cleese-like manner saying, “Don’t mention the runway extension. I did once but I think I got away with it.” Or has interest simply waned?

None of our new councillors have publicly supported the extension. Of the old guard, only Mayor Lester and “Swampy” Marsh have expressed support, and not for a while.

Can you blame everyone for keeping quiet? According to the airport, international arrivals have dropped by 9000 in the last year. However, Wellington-Auckland trips have increased.

I’m sure the airport would argue that the numbers would reverse if we had a longer runway, in the same way Roger Douglas argues that any failures of Rogernomics were because he wasn’t allowed to go far enough.

As for the Singapore route, even though it was touted as a great deal by subsidy supporters, Singapore Airlines recently announced that it was cutting back on flights to Wellington from August to October. To be fair, the cutback is only about 5 per cent and the airline said it is simply dealing with lower demand in the off-season. Surely demand will pick up in January with the glorious summer weather and the Wellington Seve … oops.

When Mayor Lester recently addressed anti-runway lobby group Guardians of the Bay, co-chair Dr Sea Rotman reported that, “Mr Lester stated that if the [Singapore] ‘Capital Express’ route take-up indicated a lack of demand, the runway extension would be taken off the table.”

Though a 5 per cent drop is hardly the sort of customer drop-off that happened with events like the Seven … oops … I’m sure it’s still far from the type of demand that he and other runway supporters had hoped for.

Since being elected, Mr Lester has won many friends. His response to the Kaikoura earthquake was exemplary, his support for council housing has widespread support, and his progressive council has been praised by both business and citizen groups. The mayor’s style of efficient but consensual leadership has drawn praise from councillors on all sides.

If the “Capital Express” route continues to be sluggish, then Lester would have good reason to do what I suspect the majority of his councillors and Wellington’s ratepayers want him to do and throw the plans for this hazardous boondoggle off the table and deep into the dangerous 9-metre Lyall Bay swell.

 – Dave Armstrong, The Dominion Post

For immediate release 6 March 2017

Residents’ and ratepayers’ group the Guardians of the Bays have today welcomed news that Wellington International Airport has requested an interim adjournment of proceedings from the Environment Court. The request from the Airport comes in response to the Court of Appeal ruling that the Civil Aviation Authority must reconsider its decision on the length of the proposed runway safety area.

Guardians of the Bays’ Co-Chair Richard Randerson said the request showed that WIAL has not considered all the issues in enough depth. “We are pleased that the Airport is reconsidering its position. The runway extension proposal continues to face hurdles because it has not been well considered or evaluated. This serious concern around safety is just one of many examples where the numbers don’t stack up. There is already evidence that the proposal is likely to cost more than the $350m originally suggested. An extension to the runway safety area would push costs well over the half a billion dollars it is currently expected to reach and would put the project well outside the parameters of the current Environment Court application.”

Co-Chair Dr. Sea Rotmann said the burden to ratepayers and taxpayers of the proposed extension continued to be unacceptable – particularly as the suggested benefits are anything but guaranteed. “No airline has committed to flying into an extended airport and the one airline currently flying (via Canberra) is getting very low loadings, according to an independent monitor of routes around the world. The Airport has specified the limit for its own investment in the extension at $100m now. Anything above this must come from Wellington ratepayers and New Zealand taxpayers. The business case for the runway still hasn’t gone through the Treasury’s Better Business Case process to prove if it is even eligible for public funding.”

In a meeting with the Guardians last month, Mayor Justin Lester said that the extension was not likely to happen anytime soon and that Wellington City Council would not commit to providing more than $90m. “It was heartening to hear our Mayor show he is sensitive to the issues at play and that he has put a limit on more public funding to support the Airport’s case – we expect him to stand by that,” said Dr Rotmann. “The Council already gave the Airport $3m of ratepayer’s precious money to fund the creation of its reports, which are consistently being shown to be little more than ‘spin’ to support the Airport’s slant on the proposal.”

“It would be best for the Airport to withdraw its application completely, rather than further burden the hard-working individuals who are raising their own funds to be able to participate in the Environment Court Process.”
ENDS

Media contacts: Dr Sea Rotmann 021 246 9438 and Richard Randerson 04 976 6050/ 021 159 6734

By Michael Reddell, October 17, 2016. Link here.

Fairfax’s Hamish Rutherford had a substantial piece in Saturday’s Dominion-Post on the proposed Wellington airport runway extension, under the heading If we build it, will they come? (a rather similar title to my own first post on the airport last year).  It seemed like a fairly balanced article, covering many (but not all) of the key uncertainties about the project.   Most of them wouldn’t be a matter for public concern if this was to be a privately-funded project, but it isn’t –  and everyone agrees on that.

There was an interesting quote to that effect at the start of the article from airport company chair Tim Brown.

As Tim Brown tells it, the first time he discussed a “back of the envelope”-type analysis of the cost to extend Wellington runway with the airport’s chief executive, Steve Sanderson, the conversation was “completely negative”.

…..Brown had just been presented an outline of a $300 million project, aiming to enable non-stop long-haul flights to the capital.

However, the  potential gains to the airport (two-thirds owned by Infratil, the rest by Wellington City Council) were likely to see a boost in profits that would only justify it investing around $100m.

Whatever the final costs of the project might be (and the estimates are unmoved in the years since), Brown was clear about the chances.

“Literally within 10 seconds I said: ‘So what? What do I care? We’re not going to do that, are we?’,” Brown recalled this week.

This isn’t a project that might need the last 10 or 20 per cent of the cost picked up by the taxpayer/ratepayer to make it viable.  Instead it only works –  even on their own numbers –  if the Crown/WCC picks up two-thirds of the capital cost (and ratepayers have already paid millions of dollars to get the proposal this far).  This is a politically-driven project at least as much (and probably more) than it is a WIAL/Infratil one.

The whole process is getting underway again now, both because the airport company (WIAL) has restarted its resource consent application, and because now that the election is past the ability of citizens and ratepayers to hold in check the big spending “boosterish” tendencies of the mayor and councillors is diminished considerably.  It is difficult to tell quite what the balance of the council now is, but the new mayor has been at the forefront of the various “booster” projects the Council is spending money on, and one councillor who was vocally opposed to the extension in the previous term is no longer on the council.  WCC’s track record –  of wanting to “do something”, spend money on big ticket initiatives, often with little or no public scrutiny (sometimes not even with scrutiny from councilors) – is pretty disquieting.

Presumably under some pressure during the election campaign, the new mayor Justin Lester modified his stance somewhat in responding to pre-election candidate surveys.

I have committed to seeking the resource consent for the airport extension project. It’s too early to say whether the project will proceed because the following three caveats will need to be satisfied before it proceeds:

1. Resource consent approval

2. Financial support from Central Government

3. Commitment from airlines to fly direct routes to Asia.

This is a 50 year project and needs careful consideration before any decision is made.

On the face of it, that looks like a fairly insurmountable set of hurdles.  It is very unlikely that any airline is going to give a commitment to fly direct long-haul routes between Asia and Wellington in advance of (multi-year) construction even starting –  they couldn’t know what would happen to fuel prices, the world/regional economy or the like in the intervening period.    That is especially so given the expressed lack of interest in flying long-haul from Wellington from the one airline that always will be flying New Zealand routes, Air New Zealand.

And, to date, central government seems to have been commendably non-encouraging about any suggestion of central government financial support.

So what –  beyond the track record of poor quality secretive spending – makes me uneasy about the Lester-led Council?  First, Lester knows very well that he won’t get commitments from airlines before the Council has to make decisions on whether to fund the runway extension –  but he might get non-binding expression of interests, which could be politically spun to sound a bit like commitments.  Second, the government has a  track record of ending up funding uneconomic infrastructure projects, including ones it initially poured cold water over.  One could think of Transmission Gully, or KiwiRail, or Northland (by-election) bridges or –  perhaps most concerningly – the City Rail Link in Auckland.   With a modest budget surplus to be subject to an electoral auction next year, is it so inconceivable that the government could change tack (government built houses and immigration last week) and throw $100 million in the direction of the runway extension?  Compared to the spending on Transmission Gully, it would be chicken feed.

And while Lester is quoted extensively in the Fairfax article, neither of the conditions in the pre-election quote above (airline commitments, central government funding) is repeated.  [UPDATE: I gather they are still part of his set of pre-conditions]

So ratepayers beware.  Citizens beware.

In the Fairfax article, Lester tries to blunt possible ratepayer concerns by suggesting the bulk of any Council funding should be raised from business rates rather than from residential ratepayers, because “the majority of the benefit would go to the business sector”.  That might sound superficially plausible (if there were material benefits at all) but the mayor seems unaware of the notion of tax incidence: that the party who writes the cheque to pay a tax or rates bill isn’t typically the party that bears the economic cost.   Much of any company tax is actually borne, over time, by workers –  because less investment occurs than otherwise, and wages are lower as a result.  Just as renters bear some/much of the incidence of rates bills paid by landlords, we should expect that the wider pool of Wellington citizens would bear much of the economic cost of higher business rates to fund an airport extension, even if no non-business ratepayer ever has to increase their direct rates bill.  This is an issue that should bother all citizens, not just business ratepayers.

A lot of the decision-making should turn on a robust cost-benefit analysis of the proposal.  WIAL and the Council have commissioned their own analysis, which suggests large positive national benefits.  Not many people who have looked carefully at the numbers have found their numbers persuasive.  Justin Lester seems to suggest this is all about self-interest

“I’m not going to have people telling me and telling Wellington and telling our council what we should be doing because of their own interests.”

If one wanted to descend to a similar level, one could ask about the incentives on and interests of councillors –  spending other people’s money on big ticket projects.  But, perhaps more importantly, advocates like Lester would do better to front up and explain why they disagree with specific points raised by critics –  whether those critics are representatives of the airline industry, or other commentators and economists.

In the last few weeks, questions have begun to surface about the estimated cost of the runway extension itself.  In a private sector project, citizens wouldn’t need to worry too much.  After all, if the company proposing the development gets it wrong, its own shareholders will be the ones who lose money.  But this is a project where large amounts of ratepayers/taxpayers money will be at stake, and where it isn’t clear how well aligned incentives really are.  The construction estimates are being done for WIAL, which has already concluded that it would only be worth them putting in around $100 million.  If the project is to proceed central or local government will be on the hook for the rest.  Mightn’t the incentives at present be to keep the construction estimates to the low end of a possible range?  Doing so might (a) increase the chances of getting a resource consent (since, sadly, the Environment Court needs to do an economic appraisal) and (b) increase the chances of getting central and local government approval to proceed, with political commitment to the project, with any later cost-overruns perhaps largely falling on those parties.

My own unease has been around three main points; developed in earlier posts:

(a) the large assumed increase in long-haul visitors to New Zealand, simply because of an option to fly long-haul into Wellington (rather than Auckland or Christchurch.

(b) the very large assumed “wider economic benefits” assumed to flow from such increases in visitor numbers, even if the passenger projections were accurate, and

(c) the discount rate being used to evaluate such gains (many of them decades into the future).

I dealt with the visitor number points in this post late last year.   The WIAL cost-benefit analysis uses passenger projections which assume an increase of 200000 visitors to New Zealand (building up over time) simply because it becomes physically possible to fly long haul into Wellington.   That seems implausible.  In his own look at the passenger projections, Ian Harrison of Tailrisk Economics, noted that the numbers assumed that within 20 years 30000 more Americans a year will come to New Zealand simply because they can fly directly into Wellington.   One can imagine a few more might want to arrive via Wellington, but is it really credible that so many more will come to New Zealand as a whole?  Perhaps more startling were the assumptions for “other Asia” (ie other than China and Japan).  At present, only around 30000 people come from those countries to Wellington in a year.  The projections assume that putting in a runway allowing long-haul flights will provide a boost of an additional 105000 visitors annually within 20 years.  Were Wellington Florence, perhaps it would be a credible story.  As it is –  and even with some more marketing spending and a heavily subsidized new film museum – it just doesn’t ring true.  Long-haul passengers don’t come to New Zealand for its cities –  the cities are mostly gateways, and in the case of the lower North Island, Wellington isn’t the gateway to much.  (And yes, I can see the South Island as I type, so perhaps there is a small “gateway to the South, by slow ferry” market).

I touched on the “wider economic benefits” and the discount rates in this post. Here are some extracts from that post:

But much the biggest issues relate to the possibility of benefits to New Zealand from additional foreign tourists buying real goods and services in New Zealand.  Sapere appear to have estimated a total for the likely increase in tourist spending in New Zealand and then subtracted an estimate for the cost of providing those services.  For that they have assumed that 45.5 per cent of the expenditure is domestic value-added (ie returns to labour and capital).  That approach doesn’t seem right and generates highly implausible estimates.

The producer surplus is the gain to the provider of a good or service over and above what he or she would have been willing to provide that service at.   The cost of providing the service includes the cost of intermediate inputs (materials etc) but also the cost of the labour and the cost of capital (a normal rate of return).  If the producer sells product at that cost, there is no producer surplus. In this context, there is no net economic benefits –  economic costs have just been covered.

Over the long haul, in reasonably competitive markets, producer surpluses should be very small (in the limit zero).  For a hotel that budgeted on 80 per cent occupancy, a surprise influx of visitors for the weekend will generate a producer surplus –  the windfall arrivals add much more to revenue than they do to costs of supplying the service.  But over the long haul –  and the airport project is evaluated over the period out to 2060 –  it is fairly implausible that there will be any material producer surplus resulting from well-foreshadowed increases in visitor numbers.  Most of what tourists spend money on in New Zealand are items such as accommodation, domestic travel, and food and beverage.  In all those sectors, capacity is scalable.  One would expect new entrants just to the point where only normal costs of capital were covered.  In the long run, supply curves for most of these sorts of services/products should almost flat.

My proposition is that there are few or no producer surpluses likely to arise from a trend increase in foreign tourism as a result of extending Wellington airport.  But even if there were, any such gains would have to be offset against the loss of producer surplus for New Zealand producer (to foreign producers instead) from New Zealanders taking more holidays abroad.  It makes little difference to the hoteliers if I take my holiday in London instead of Queenstown, while at the some time someone in Manchester takes his in Queenstown instead of taking it in London.

Even if the consultants are right that there would be more additional inward visitors than outward, any producer surpluses from either set of numbers should be small.  And the net of two small offsetting numbers is even smaller.

The safest assumption, in evaluating the WIAL proposal, is to assume that the economic benefits of the proposal all accrue to users, and that there are no material net economic benefits (or costs) to the rest of the community.  Perhaps there is a small amount in the net GST flow, but it is hardly worth focusing on given the scale of the other uncertainties.

Perhaps this point will seem counterintuitive to lay readers and city councillors.  Surely “Wellington” or “New Zealand” is better off from having more foreign visitors (assuming the numbers outweigh the increased outflow of New Zealanders)?  And if so, shouldn’t we –  Councils, government –  be willing to spend money to get those benefits?   The short answer is no.    Good and services cost real resources to provide, and in a competitive market simply providing more goods and services won’t make the city or country better off –  you need to be able to sell stuff that generates more of a return than it costs to provide (including the cost of capital).  Vanilla products and services typically don’t do that.  After all, labour that is used to provide services to tourists is labour that can’t be used for something other activity.  And over a horizon of 45 years we can’t just assume there are spare resources sitting round unused.  Spending public money to generate this economic activity will come at a cost of some other economic activity being displaced (as well as the deadweight costs of taxation, which are allowed for in the cost-benefit analysis).

If, to a first approximation, there are no “net incremental economic benefits” for the “rest of the community” then even if the WIAL/Sapere passenger number estimates are totally robust, the net benefits of the project drop from $2090 million to $954 million.

It is not as if the new visitors – even if they eventuate –  are likely to be top-end exclusive customers.  Business and government travel –  a significant part of the Wellington market –  is unlikely to be much affected, and any boost to overall visitor numbers seems likely to be mostly tourists, consuming fairly vanilla, easily replicable, goods and services.

And what of the discount rate?

It is very unlikely that any private company (or shareholder) would evaluate such a risky project using anything as low as a 7 per cent real cost of capital.  On the WIAL/Sapere numbers, even raising the discount rate to 10 per cent –  a fairly typical cost of capital for Australian companies according to a relatively recent survey by the RBA –  roughly halves the value of any net benefits from the project (even if all the other assumptions about passengers numbers, and “wider economic benefits” are in fact well-founded).  But this runway extension seems much riskier than the typical investment project –  it is location-specific, not usable for anything else, and relies on assumptions that involve transforming the nature of the business (ie there is no long haul capacity at present, and no one can know with any confidence how much demand there might be for the service).  It would be enlightening if Infratil/WIAL told us what cost of capital/discount rate assumptions they would use in evaluating such a project if all the risk were on them?  I’m sure, for such a hard-nosed bunch of operators, if would prudently be more than 10 per cent real.

The Fairfax article picks up a number of other points, including some comments from me. In some of those comments, I probably wasn’t as clear as I might have been.

A few weeks ago, Singapore Airlines –  assisted by a non-transparent Wellington City Council subsidy –  began flying several times a week between Singapore and Wellington, with a stopover in (of all places) Canberra.  No one know whether those flights will succeed (SIA reportedly wants to move to daily), and become viable without ongoing Council subsidies.  That uncertainty is reflected in the article.  Tim Brown from WIAL seems to believe that if the route succeeds, and attracts a larger proportion of foreign passengers, it would tend to support the case for the runway extension.  Justin Lester seems a bit nervous

Like the airport company, Lester also appears to concede that if the Singapore Airlines flights do not show the demand its supporters hope, it would be bad news for the runway extension.

“People are getting on and off these planes four times a week and if the demand doesn’t go up to seven times a week, you know, we won’t need to do it,” he said, quickly adding that this would be a “strong indicator” rather than proof the runway extension was not worthwhile.

I was quoted along similar lines

Would strong success of Singapore Airlines’ new route, with a high proportion of visitors, help prove the case of the missing passengers?

For a man who freely admits he is naturally sceptical about most public infrastructure projects, Reddell is surprisingly open to the idea.

“If they can make that route viable without larger public subsidies than they’ve got then I think that would be interesting”, especially given that passengers face being “stuck in Canberra for a couple of hours”.

But with several caveats.  First, even if the Wellington-Canberra-Singapore route proves viable, it only offers any insight on the long-haul issue if a material proportion of the passengers in and out of Wellington are not just Wellington-Canberra passengers (although it seems unlikely that a daily 777 flight just Wellington/Canberra would be economic).

Second, if such flights prove viable with the current runway, that is great. All involved are likely to gain.  But that is different proposition than spending  (an irreversible) $300 million on a new runway.  As I noted

However, Reddell adds, this may only prove Brown is right about the problem being a lack of marketing, without proving the airport extension itself was needed.

“I would open up the argument, [of] let’s subsidise some more flights, and if they don’t work we can shut them down, whereas with the $300m runway extension, it’s a sunk cost,” Reddell said.

“The great thing about marketing is you can shut it off. You can’t do much with a runway extension” that doesn’t work out.

In the cost-benefit analysis, one of the options they looked at was a big increase in marketing expenditure.  It produced net benefits not that much smaller than those purportedly on offer from the runway extension, and could be re-evaluated constantly, rather than being irreversible.

If central and local government do go ahead and fund the extension, it wouldn’t surprise me if 10 years hence there were a few long haul flights in and out of Wellington.  But, of itself, that would prove nothing about the economics of the project.  The financial contribution of central or local government would, no doubt, be treated as a bygone –  with no direct financial returns, and arguable and uncertain indirect ones –  and with a runway in place, and only its own capital contribution to cover, perhaps WIAL could attract a few flights.  That might leave today’s councilors feeling better, as they show the extension to their grandchildren, but is no reason to think that Wellington citizens and ratepayers will have been made better off as a result.

I’ve not touched at all on issues like the possibility that future carbon charges make long haul travel less attractive than it is today, or that rising sea levels might raise questions about Wellington airport more generally.  But they all should bring us back to Justin Lester’s point

This is a 50 year project

and

His “gut instinct” was that the case would eventually be proven, but it could be soon, or it could be decades away.

The costs of waiting simply aren’t that large.  If the proponents are right, the case will look that much more compelling  –  and less risky –  10 years from now.  If they are wrong, (lots of) real resources will have been irreversibly wasted –  and that burden will be felt not just by Wellington businesses, but by all citizens and ratepayers of Wellington.   I’d urge the incoming Council to reflect on that choice, and to take seriously what decisionmaking under uncertainty should mean.

By Michael Reddell

Link

At about 3pm, the first Singapore Airlines flight to Wellington, via Canberra of all places, lands at Wellington Airport.  Wellington-boosters, well represented on the Council and the Chamber of Commerce, talk up the first “long-haul” flight to and from Wellington.  All of which would be more impressive if it were not for the ratepayers’ money being (secretly – no information on the amounts or terms of these sweetheart deals, no robust cost-benefit analysis etc) used to make it all possible.    Were the flights financially self-supporting that would be the best evidence of them being “a good thing”.  But they aren’t.  That means (a) a presumption against them being “a good thing”, and (b) a likelihood that they won’t survive for long, at least without some permanent subsidy from the long-suffering ratepayers of Wellington. It probably isn’t a subsidy to the giant Singapore Airlines –  they’ll probably just manage a normal return on capital –  but by quite which canons of social justice ratepayers should be subsidizing government departments (probably the main purchasers of tickets on the Wellington-Canberra leg, and one of the larger sources of international passengers from Wellington) is beyond me.

But at least these sorts of subsidy deals can usually be terminated with not too much notice.  Other cities have tried this sort of thing, and the arrangements have typically fallen over before too long.  There isn’t much irreversibility about them.  The same can’t be said for the proposed Wellington Airport runway extension.  If it goes ahead, very large amounts of money will be irreversibly lost.

There was a very nice, accessible, article out a few weeks ago in City Journal by leading US economist Ed Glaeser.  In “If you build it…..” Glaeser tackles some of the “myths and realities about America’s infrastructure spending”.  There is a lot enthusiasm around, especially in centre-left circles, for more – much more –  infrastructure spending, to “take advantage” of the current very low global interest rates.  Enthusiasts, of course, rarely stop to ask why interest rates are so low, and expected to remain low, but set that caveat to one side for now.   Glaeser reports on a variety of studies on just how underwhelming most government-led infrastructure actually is: too often in regions that are declining rather than ones that are growing, all too often with low payoffs (and massive cost over-runs) at the best of times, and so on.  There are plenty of specific differences between the US situation and our own – we don’t have the Senate, steering funds to lightly-populated states, but then we have by-election promises to build bridges to anywhere –  but I don’t think we have anything to be complacent about.  His penultimate paragraph is relevant pretty much anywhere

Economics teaches two basic truths: people make wise choices when they are forced to weigh benefits against costs; and competition produces good results. Large-scale federal involvement in transportation means that the people who benefit aren’t the people who pay the costs. The result is too many white-elephant projects and too little innovation and maintenance.

Just last week we heard of the latest large cost-escalation in the hugely-expensive questionable Auckland inner-city rail loop.  “Who cares” seems to be the reaction of central (National) and local government (Labour) politicians –  ratepayers and taxpayers will pay.   In Wellington the largest regional roading projects for generations (probably ever) is underway at Transmission Gully.  The economics of the project are simply shocking, but that doesn’t seem to bother our National or Labour politicians.

And then there is the airport extension proposal.  Now, on paper, it might look like a project that might pass some of Glaeser’s tests.  After all, Wellington Airport isn’t owned by central or local government –  although Wellington City has a minority stake –  but by a company majority-owned by some fairly hard-headed infrastructure investors/operators, Infratil.

There are plenty of people around –  including commenters here on previous airport posts –  who will attack Infratil.  I’m not one of them.  Infratil is a private sector business, no doubt pursuing (as it should) the best interests of its shareholders.  And Infratil has been quite unambiguiously clear that the airport extension project simply does not stack up on commercial grounds.  In a comment on this blog six months ago, the chairman of the airport company Tim Brown put it this way:

The Airport extension is forecast to cost $300m. If airport users who get no value from it (people on smaller aircraft, people buying coffee, parking cars, etc) don’t pay anything towards it, then the estimated present value to the airport company from those who do benefit from the extension and do help pay for it may be about $100m. So on purely commercial grounds and avoiding cross subsidies the shareholders are expected to contribute that sum.
Clearly that makes it a dead duck on a purely commercial basis. Who would hand over $300m for something “worth” $100m?

Since Infratil owns 66 per cent of the airport company (WIAL) that would involve them putting up around $66m and the minority shareholder putting up $34 million.

So when people attack the idea of council or government handing over (lots of) additional money to get the project going (in addition to the millions the Council has already spent) as “corporate welfare”, they are simply wrong, at least as regards Infratil.   This project seems to be driven by the Council “boosters”, presumably why they’ve been so ready to spending large amounts of ratepayers’ money on it already.  If some branch(es) of government in fact do stump up hundreds of millions of dollars beyond what is commercially justifiable, some of it will certainly benefit some local businesses, but most of it will simply be money down the drain; spent on real resources to build an extension that simply has almost no economic value.  Other than the exercise commissioned by the airport company itself –  funded by the Council –  no one who has taken a hard look at the numbers regards the claims of large scale economic benefits as stacking up.  Of course, there are plenty of “boosters”, and others who think of (real) long-haul flights from Wellington as a nice idea, but the numbers simply don’t stack up.

Fortunately, it is local body election time.  If it weren’t, I fear the project might be rammed through with as little serious scrutiny as the cosy subsidy deal to fund a movie museum/convention centre in Wellington recently was.  (The movie industry, of course, surviving on large scale taxpayer subsidies).  At present, WIAL has a resource consent application underway.  (Of course, if the project can’t get a resource consent, the economics is irrelevant.)  Somewhat curiously, WIAL recently temporarily put the resource application on ice. This was, ostensibly, to allow them to take account of points raised in the numerous public submissions. I’m a bit skeptical of that story –  surely the submissions can’t have been much of a surprise –  and wonder if it isn’t a convenient way to minimize coverage of the issue during the local body election season.  Perhaps not, but the timing is certainly convenient.

A year ago, I assumed that the Wellington City Council – which hardly ever turns down an opportunity to waste money, and which is in the thrall of an “economic development” mindset –  would simply write the cheque, shifting large amount of ratepayers’ money into a project which  –  while fundamentally uneconomic –  it would not even secure a much-increased ownership interest in.

But as the election season has gone on, I’ve begun to be a little more hopeful that perhaps hard-headed analysis might actually play some role in the eventual decision on Council funding (or indeed, central government funding, where there is little sign of much greater discipline around capital spending).   Our mayoral race is hotly contested, and so there have been plenty of surveys asking candidates for their views on the airport extension.  Here I’m drawing mostly from a survey done by my local residents’ association.

Somewhat encouragingly, of the eight mayoral candidates not one is now unambiguously in support of spending lots of ratepayers’ money on the runway extension.

One of the mainstream candidates –  centre-right councillor Nicola Young –  is outright opposed

 Opposed. Initially I thought it should funded in line with its ownership (Infratil 66%, WCC 34%) but now I believe it would be a $300million folly. Subsidising international airlines is very costly, as Christchurch Airport discovered when it paid Air Asia X millions to get direct flights to Asia; the flights were cancelled after nine months

Another sitting councillor, this time from the left, Helene Ritchie, is also opposed

I have repeatedly opposed it and any funding towards it-including Council using rates to support an application by the Company for a  resource consent.

She further offends the elites by suggesting that voters should get to make the final decision on such an expensive proposal

The Environment Court should throw it out. If it is not thrown out, then as mayor I will call for a referendum/poll of the people, on this proposed rates funded $350 million (probably likely $500million) Airport Extension, asking residents, “Do you want to pay for the proposed airport extension? Should rates be spent on “corporate welfare”-an unnecessary airport extension?”

Another candidate –  left-wing economist Keith Johnson, campaigning (I suspect) against waste rather than to be elected –  is also clearly opposed

I am opposed to the project and have submitted a substantial paper detailing my objections to the Environment Court, covering safety, environmental, budgetary and business-case concerns.
I am absolutely opposed to the allocation of $90 million from Wellington City Council to the project, as the proposal essentially constitutes corporate welfare funded from the pockets of ratepayers.

A final minor candidate is also clearly opposed.

Unfortunately, most of the more likely candidates are somewhat more positive.

Sitting councilor Andy Foster probably isn’t going to be mayor, but despite being a typical “booster” most times when it comes to council spending, on this one he has clearly been having second thoughts.

It will depend on whether it can get over some very tough hurdles: consent, demonstrated airline commitment, robust economic case and obtain funding.  If it can, I will support it. If it doesn’t I won’t.  I suspect it won’t.

The election seems set to come down to a race between the current Labour Deputy Mayor (endorsed by the Greens) Justin Lester, the current Labour mayor of Porirua Nick Leggett, and the centrist councillor Jo Coughlan.  All three have a track record of supporting spending (lots of) public money on “economic development” projects, but I am mildly encouraged by how cautious they now seem to have become.

Here is Coughlan

I support the runway extension subject to it getting a resource consent, a business case that stacks up and appropriate funding. If the city does contribute, it should be reflected in our ownership skate. It should not be a donation

On that basis, the Council would end up owning a very large share of WIAL.  It is a middle of the road line, but it is important for Wellington voters to remember that the project is fundamentally uneconomic, and whether any money was contributed as an equity stake or as a “donation” doesn’t change that.  Central government had lots of equity stakes in Think Big projects in the 1980s.  They were all financial and economic disasters.

Here is Leggett, current mayor of Porirua

I support the idea of the runway extension. Wellington has to open itself outwards and create better connections internationally to grow jobs and investment.   I don’t support the council funding the extension beyond its 33% shareholding and if the Resource Consent is not successful – or the Government refuses to offer funding – then the project won’t proceed.

Ah yes, the “idea” sounds good.  But if it were such a good idea, users would pay for it.  That is the market test, usually a pretty sound one.  One gets the impression he doesn’t actually think the project will pass a proper cost-benefit analysis for the Council –  and $200m is a lot of money.  Leggett seems to be looking to central government –  and as he must drive past the Transmission Gully works each day on the way to the office, perhaps that is no wonder.  Wasteful capex is just par for the course –  especially when it could be dressed up in current fashionable rhetoric about advancing (with subsidies) export education and tourism.

And what of the Labour (and Greens –  even though as a party they ostensibly oppose the runway extension) candidate, Justin Lester?  He has been a strong advocate of the project, and was apparently the key figure in securing subsidies for the Singapore Airlines flights to Canberra. But now….

I have committed to seeking the resource consent for the airport extension project. It’s too early to say whether the project will proceed because the following three caveats will need to be satisfied before it proceeds: 1. Resource consent approval 2. Financial support from Central Government 3. Commitment from airlines to fly direct routes to Asia.
This is a 50 year project and needs careful consideration before any decision is made.

So even for Lester this is too big for the Council.  It can only proceed with central government funding.

Perhaps the most encouraging bit is his final sentence.  It is a long-lived project, and the option to delay must be a real one.  Perhaps in five or ten years time we will have a more secure feel for, for example, the viability of the new Singapore flights.  And –  for those more environmentally inclined than I am –  there is always the question of sea-level rise to consider, for a very low-lying airport.  Perhaps we could have another look in 20 years time?  Who knows, by then the benefits might be so overwhelming the users might even pay for the project?

In our council system, even mayors have only one vote.  Whichever of these candidates gets elected the project might still get significant additional council funding, or not.  And as central government has a terrible record of pouring money down sinkholes –  Transmission Gully, KiwiRail, probably the Auckland CRL etc – it might get funding from there even if the Council isn’t willing to stump up much.  But it is at least slightly encouraging that the mayoral candidates, reading the tea leaves of voter attitudes, have all either come out opposed to the Council paying for the project, or hedging support around with some tests that will be very hard to pass.

I’m not usually a single issue voter –  and the debacle of the Island Bay cycleway still concentrates the mind in other directions at times –  but this time I am.  There is simply too much money at stake, to allow boosters with the public cheque book to pursue their field of dreams vision for Wellington airport.

Original article on scoop.co.nz

By Pattrick Smellie

Aug. 15 (BusinessDesk) – Wellington’s airport runway extension initiative fails on the grounds that lower North Island and South Island travellers are already flying to long-haul destinations through Auckland or Christchurch and the region is not a magnet for tourists, who are more likely to favour Auckland and Queenstown as an arrival point.

That’s the conclusion of a study commissioned by the lobby group for international airlines, including Air New Zealand, lodged in opposition to Wellington International Airport’s application for a resource consent to lengthen the capital city’s runway by 350 metres.

The new study, by Australian-based Ailevon Pacific Aviation Consultants for the Board of Airline Representatives in New Zealand, said the likelihood of airlines establishing new long-haul services to the capital is “extremely remote, implausible at best”.

It contests the findings of a study by rival aviation industry consultants, InterVistas, which APAC said has over-estimated demand for long-haul services to and from Wellington, which it said has not benefitted from the boom in international tourism that has boosted arrivals, particularly to Auckland and Queenstown, in recent years.

“Visitor demand growth from long-haul markets to Wellington has lagged not only the New Zealand average but also other airports in New Zealand without long haul international services,” said the APAC report.

Using Australian Bureau of Statistics and International Air Travel Association (IATA) data, APAC concluded that Wellington’s strongest growth has been in short-haul traffic between the capital and Australian cities and the Pacific Islands, where most of the growth in new routes to Welllington has been in recent years.

“Presently, Wellington has no markets with sufficient origin-destination demand beyond New Zealand, Australia or the Pacific Islands that could support non-stop services with adequate frequency.”

The report makes almost no mention of improved export freight-forwarding opportunities that might arise from a longer runway – the main benefit cited by Wellington Chamber of Commerce head John Milford, who called for support from local businesses ahead of last Friday’s deadline for submissions to the Wellington Regional Council on WIAL’s application for a resource consent to undertake the $350 million project.

WIAL is seeking to make Wellington an alternative long-haul destination to Auckland, the country’s dominant airline gateway, the existing second gateway Christchurch, and Queenstown, which is increasingly connected by direct flights from Australia.

WIAL is owned 66 percent by Infratil, the NZX-listed infrastructure company, and 33 percent by Wellington City Council. It is seeking the majority of the runway extension cost from central government and Wellington ratepayers, arguing the benefits would accrue more to the country and the region rather than the airport owner, which cannot justify the expansion on purely commercial grounds.

APAC disclosed in its submission that it has undertaken work for key opponents of the Wellington plan, Air New Zealand, Auckland International Airport, and Queenstown airport, in which AIA has a shareholding, but says its analysis is independent.

“The simple fact is that Wellington International Airport’s catchment region is too small and too slow-growing to warrant non-stop long-haul services,” said APAC, which makes serious accusations about the quality of the InterVistas analysis undertaken for WIAL.

“InterVistas .. have either failed to accurately reflect the nature of demand at Wellington International Airport when benchmarked against neutral and industry-accepted data sources, including data sources InterVistas purports to rely on, or appear to have reinterpreted the data to support a case for long-haul demand,” the APAC report said.

In a submission on the runway extension application, the New Zealand Air Line Pilots Association said there was increased risk of a serious accident or incident, especially from larger planes using Wellington Airport, unless an adequate Runway End Safety Area (RESA) of 240 metres or a recognised equivalent solution is used.

NZALPA president Tim Robinson said despite his members having the most to gain from the runway extension, they were opposed to it unless it included the RESA. He suggested an alternative though known as Engineered Material Arresting System in use globally, which is a crushable material installed on an existing RESA to declerate an aircraft in an emergency.

Earlier this month, the association filed an appeal against the High Court’s decision to turn down a review of the runaway’s 90-metre safety area.

(BusinessDesk)

“Wellington City Council has no Plan B to protect Wellington’s ratepayers if the Wellington Airport Extension doesn’t deliver,” according to business, recreational, community and environmental groups who are calling for more rigour around the proposal.

The Guardians of the Bays, a citizen-led umbrella organisation representing a growing number of groups of businesses and individuals who are concerned the runway extension will not deliver the benefits being promised by Wellington International Airport Limited and some City Councillors.

Co-chairs Dr Sea Rotmann and Richard Randerson said the airport is being presented to the public as Wellington’s main economic growth option.

“We are all keen on a progressive and successful Wellington. But the numbers being put up for this proposal simply don’t stack up.

“The Council has promised $90 million of ratepayer money, on top of $3 million already handed over to the airport, for a runway extension that has no business case. The Airport has refused to put its numbers under the scrutiny of the Government’s own Better Business Case process, which is required for getting Central Government funding.”

“Economically, the runway extension has the potential to lump Wellington ratepayers with a wasteful and unnecessary White Elephant requiring significant ratepayer subsidies and hindering economic growth for decades. Ratepayers throughout the region will be faced with higher rates and debt and there is no guarantee that any benefits will flow through to Wellingtonians.

“The only one who really wins from this extreme version of corporate welfare is Infratil” said Mr Randerson.

Dr Rotmann said the Airport has been over-exaggerating the tourism and visitor benefits.

“There is no evidence that if ‘you build it they will come’. The Singapore Airlines ‘win’ to fly to Singapore via Canberra comes at the cost of millions of ratepayer subsidies to the airline and is of no more benefit to Wellingtonians than already-available international flights through Auckland, Sydney or Melbourne,” she said. Singapore Airlines itself said it would not be able to fly this route without the additional passenger numbers from Canberra.

“If the airport extension is such a good idea then why is Infratil not paying for it, rather than relying on corporate welfare from ratepayers and taxpayers?

“We call on all mayoral and council candidates to demonstrate a deeper vision of what growing our city could look like, rather than just pinning it all on an airport extension.

“So far only a handful have said the airport extension needs closer scrutiny and questioned whether ratepayers should provide corporate welfare to Infratil to build it. It should be noted that some of those same mayoral candidates now asking more searching questions, voted for ratepayers to pay half of the airport’s resource consent application costs, even though the City only owns a third of the shares. We need a mayor and councillors that act in the best interests of all Wellingtonians, not just big business.”

Dr Rotmann said there will be many environmental and recreational impacts. The proposal would affect surfers, recreational fishers and other users of Lyall Bay. It will also harm sensitive ecological and environmental treasures, including little blue penguins, reef herons, giant kelp forests and other marine life that would suffer enormously from millions of tonnes of rubble being dumped into the South Coast. 11ha of ocean would need to be reclaimed without having a single airline lining up to fly here long-haul.

The proposal would also cause major traffic disruptions to Wellingtonians during the four-year construction period, as up to one truck every two minutes transfers material to and from the site, via SH1, the two tunnels, the Basin reserve and through the airport gates.

“This is a Wellington-wide issue. The Greater Wellington Regional Council and Wellington City Council officers who are currently checking the airport’s resource consent application have found many significant errors and gaps in the airport’s supporting evidence,” Dr Rotmann said.

“Wellingtonians have the right to know how their money is being spent. By refusing to properly answer the questions the Regional Council has asked on behalf of everyone, the Airport is failing to respect this right. The airport is either being highly disrespectful of the process or simply doesn’t have the answers,” she said.

The Guardians are encouraging Wellingtonians to have their say about the extension by making submissions to the Greater Wellington Regional Council and Wellington International Airport. The submission period runs until Friday 12 August.

A simple guideline for how to submit and where to send submissions can be found below.

“This is such an important decision for Wellington that we need to capture as broad a range of perspectives and views as possible,” said Dr Rotmann.

Submission guide:

[gview file=”https://guardiansofthebays341400583.files.wordpress.com/2021/06/628df-final-gotb-submissions-guide-5-july.pdf”%5D

 

Opposition to the proposed runway extension is growing if attendance at the recent Guardians of the Bays information evening is anything to go by. A diverse range of groups, from business, community, recreational and environmental organisations are asking questions to peel away the public relations spin around the ill-conceived, expensive airport extension proposal.

Groups as diverse as Forest & Bird; various Residents’ Associations; Wellington businesses; Save the Basin; the Surfbreak Protection Society; Hue te Taka Society; OraTaiao: The NZ Climate & Health Council; the Wellington Underwater Club; 350.org and the Green Party, to name a few, were represented at last week’s meeting. It quickly became clear that everyone present was deeply concerned at the spin being put out by the airport company, and the potential cost it will have to ratepayers and taxpayers, and of course to the beautiful Wellington south coast.

The meeting was MCed by Bishop Richard Randerson, who has national standing for his work in faith-based and place-based communities. He made it clear that an airport extension does not make Wellington more progressive, particularly when the ratepayers and taxpayers are being asked to subsidise one of New Zealand’s wealthiest companies.

Dr Sea Rotmann, co-Chair of the Guardians of The Bays, outlined the group’s main areas of opposition in her presentation [gview file=”https://guardiansofthebays341400583.files.wordpress.com/2021/06/b54e9-gotb-info-evening-presentation.pdf”%5D where she blew away a few airport myths like:

  • There will be little impact on marine ecology – but their ‘experts’ didn’t even know that Moa Point was a breeding habitat for the critically-endangered reef heron, nor do they know what the infill material will contain.
  • There will be little impact on recreational activities – but they haven’t really done a great job at collecting the data to support this statement. Council officers have not yet referred the application to the Environment Court because there were so many inconsistencies and information gaps resulting in 46 questions and a further resource consent needed.
  • The extension will result in fewer greenhouse gas emissions – yeah right, especially seeing it is meant to increase long-haul passenger numbers by 16.1 million versus business as usual!
  • The extension will withstand rising sea levels and 8m waves – yet all you need to do is visit Lyall Bay in winter and you’ll see 10m+ waves on a regular basis, not to mention the issues around sea level rise and storm surges affecting all access roads to the airport.
  • Trust the airport and their ‘experts’, they know what they’re doing – this from an organisation that wasn’t even able to collect a full set of data because of the bad weather in Cook Strait, who have little idea what the infill material will be (but it may be contaminated dredge spoil from CentrePort), who wanted to hide construction noise under BAU aircraft activities, who didn’t know they needed a resource consent for stormwater discharge and who have commissioned 4 economic reports claiming bigger and bigger benefits, despite their methodology continually being savaged by an army of independent economists…

Tim Jones, who brings to the group valuable experience from the campaign against a proposed Basin Reserve flyover, ran over a few traffic facts – did you know that if the project goes ahead, 1.5 million m3 of fill will be transported from Horokiwi and Kiwi Point quarries by truck through central Wellington, along SH1 through both tunnels to the airport, often every 2 minutes and all during the night? And that the revised route through Vivian Street, Karo Drive, Wellington Road, Lyall Parade, Onepu Road, Rongotai Road, Evans Bay Parade may actually pose serious safety hazards?

Rob le Petit from the Surfbreak Protection Society reiterated the support of the surfing fraternity who love their surf and whose members include leading experts in planning, oceanography and the environment. Did you know that Lyall Bay is one of the birthplaces of NZ surfing, yet the airport are proving particularly sneaky by trying to make deals with the surfers promising them an untested ‘wave focusing device’ while on the other hand the airport is aggressively attacking the legal obligations that protect the Lyall Bay surf?

Keith Johnson is standing for Mayor because he is sickened by the lack of commitment by the current crop of would-be Mayoral contenders to fairness, accountability, economics and good governance. He is especially appalled by Wellington City Council’s championing of the runway extension. Dr Johnson is a transport economist and told the meeting that the cost-benefit-analysis ratio the airport has conjured up of 1.7 (now 2.3!) is nonsense and should more realistically be less than 1.

What’s more, not only do we not know how much it’s really going to cost, the benefits the airport wizards have created keep going up, up, up – like the length of the extension (or Pinocchio’s nose!) which has grown from 300m to 363m – yet the costs, we’re told, remain the same! We should be afraid, very afraid, about putting our trust into a project of this magnitude which carries so many uncertainties and risks.

Infratil lier plane

Wellington City Councillor and former airport planner David Lee asked who is going to fund this Great Big White Elephant? The Government’s said NO, the other Councils in the region have said MAYBE to the tune of $60m, with Wellington City Council earmarking $90m (in addition to the $3m they already paid up front). As David said – this level of corporate welfare STINKS. The big winner is the airport who is only contributing about $50m! And this still leaves a $100-150 million shortfall which Mayoral candidate Justin Lester is on record as saying that if the government doesn’t step in ratepayers, or investors – whoever they might be – will have to pay.

These are some of the many, many reasons why this airport runway extension is simply madness, and why so many diverse groups will fight it to the end. But the biggest killer of the project, seeing this is the whole reason why the Council is pushing this so much, was delivered by John Beckett, the Executive Director of the Board of Airline Representatives (BARNZ). BARNZ represents all 24 airlines that are flying into New Zealand, including the five that fly into Wellington.

John made it very clear that no long-haul airlines flying to New Zealand support this project, and the reason is simple economics: the aviation sector is extremely competitive with high costs and thin margins. Long-haul aircraft need high load factors in order to operate a route profitably. It is unlikely that any airline in Asia or North America would fly non-stop long haul into Wellington because the market is too small. Their first choice would be Auckland, and then Christchurch, on the grounds of population and proximity to tourism highlights. Wellington comes a distant third. As John pointed out, the route projections and cost-benefit analysis provided by the airport’s economists are overly optimistic, and BARNZ’s economic experts, NZIER, will be on hand to dismantle the airport’s arguments in court. Without additional flights attracted by the extension, it is also likely that airport charges will rise on all other routes into Wellington in order to cover the costs and profits.

To summarise why we need to keep asking questions about the proposed runway extension:

  • There is no proven demand for it and no long-haul airlines will come here and stay the course.
  • The real cost is not known and likely to be much more than the current forecast of $300 million.
  • The benefits are unreal and over-inflated – simply conjured up by the Airport wizards…
  • Only Wellington City Council has made a commitment to fund some of the extension, leaving a huge funding shortfall.
  • Wellington City ratepayers will pay for this folly disproportionately – in terms of inter-generational debt; cost overruns; interest charges; environmental, health and recreational impacts; ensuing traffic chaos; and cost increases for every passenger and anyone using the airport, for example when parking a car.
  • Wellington Airport is in a highly risky location, both in terms of safety and impacts from climate change such as rising sea levels and other environmental catastrophes, which are already endangering access.
  • It will destroy so much of what people most love about Wellington: the Lyall Bay surf, the rugged south coast, the little blue penguin and reef heron nesting habitats, fishing, diving and the collection of kai moana, not to mention the joy it brings to everyone when we get orca visitors
  • Climate change (which threatens our economy, health & well-being) and the global agreement to move towards zero net climate-damaging emissions have been completely ignored in the airport’s cost-benefit ‘analysis’.
  • The cost-benefit analysis, when done properly, shows an actual return of investment of less than 1. That means that this is a financial loser where we are set to gain less than a dollar for every dollar spent!
  • It represents economic incompetence on the part of our politicians whose lazy thinking sees the runway extension as the answer to all our economic woes – when they are the last people we should rely on to ‘pick winners’. Justin Lester even used the Chair of Infratil, the majority shareholder of the airport and a multi-national company, in his election video. And when he got asked about this on his facebook site, he swiftly deleted the questions!
  • It provides a corporate handout to a large, very wealthy company with a billion dollars to spend which it is choosing not to invest in Wellington’s runway extension. Infratil is laughing all the way to the bank because it thinks it is getting away with taking your rates for their airport, which will end up being poured down Cook Strait.
  • This is nothing but the badly thought-out vanity project of some politicians who want to ‘leave their legacy’ by building a Great Big White Elephant on our South Coast.

We have developed a handy submission guide that can be used by every person and group wanting to join us in the Environment Court to fight this environmentally damaging case and colossal waste of ratepayers money.

If you want to join us, please subscribe to the Guardians of the Bays and help us ensure that Wellington does progress – but in the smartest, most sustainable and positive ways, not with out-dated ‘think big’ projects and corporate welfare.

 

JUST BIGGER IS BETTER AS FAR AS TRAFFIC IS CONCERNED?

By Keith Johnson
https://guardiansofthebays341400583.files.wordpress.com/2016/05/53e78-centreport0008f75f8922285.jpg

While road transport increasingly grinds to a halt in Wellington and road rage is becoming common, partly consequent on Wellington City Council’s dog-in-the-manger approach to investment in roads, the Bigger is Better philosophy is receiving ringing endorsement from local authorities with respect to the aviation and maritime shipping industries.

Much has been published on this website about Wellington International Airport’s Runway Extension Project – including an article by Dr Sea Rotmann which draws attention to the massive contribution of air travel worldwide to CO2 emissions. Maritime transport is also a major emitter.

In this respect, Wellington Regional Council should be insisting upon a proper Multi-Criteria Assessment of the proposed dredging of Wellington Harbour by CentrePort.

http://www.stuff.co.nz/business/industries/79692673/CentrePort-reveals-details-of-plans-to-dredge-7km-channel-in-Wellington-Harbour

A Multi-Criteria Assessment would cover all dimensions of a major public investment:

  1. Cost-Benefit Analysis [including the Business Case]
  2. Economic Impacts
  3. Environmental and Safety Impacts
  4. Social and Distributional Impacts

With the whole to be concluded with an over-arching summary of redlines and trade-offs.

Looking at the current situation, the parallels between the CentrePort proposal and the Runway Extension Project are very interesting:

  • Doubts about financial viability
  • Optimistic multiplier-based ‘economic’ rather than business case justification
  • Concern over who will eventually pay [ferry customers, GWC ratepayers] etc.
  • Environmental concerns

The one glaring difference is that Wellington ratepayers are not being asked to pay directly in the case of the Port.

SOME ISSUES ON THE PORT PROPOSAL THAT NEED PROPER APPRAISAL

Viability of Log Traffic growth as a major driver [with its associated road transport issues]

http://maritimealumni.ac.nz/alumni/whats-the-latest/

The silt is potentially toxic:

http://www.sandandgravel.com/news/article.asp?v1=4444

The cost could be anywhere between $20 million and $40 million:

http://www.radionz.co.nz/news/regional/265225/dredging-plan-for-wellington-port

The proposal could have adverse effects on recreational and commercial fishing, the recreational use of Wellington Harbour and artesian water pressure and purity in Eastbourne:

http://wellington.scoop.co.nz/?p=76457

Wellingtonians will pay through their rate contributions to the Greater Wellington Council and possibly also through higher ferry fares to and from the South Island:

http://www.stuff.co.nz/business/79886817/harbour-dredge-could-push-up-cook-strait-ferry-prices-shipping-federation

Any possible relationship between the dumping of silt and its migration towards the unstable deep sea submarine canyons in Cook Strait seems unconsidered:

http://www.nzherald.co.nz/nz/news/article.cfm

Plus a couple of challenges on ‘shifting sands’ by ‘Old Saltie’ Jim Mikoz:

Dredging, dumping, and the moving river of shingle

and

Why Centreport’s dumping sites are in the wrong places

CentrePort’s Channel Deepening Project

http://www.centreportbigpicture.co.nz/project-overview

CentrePort is applying for consents to deepen the harbour to allow for ships with draughts of up to 14.5metres at the harbour entrance and the Thorndon Container Wharf.

These consents would provide CentrePort the flexibility to dredge in one stage or a series of stages, allowing the port to deepen the channel only as required, in response to the size of ships actually visiting New Zealand.

An extensive optimisation exercise was undertaken to identify the most cost effective design delivering the least amount of dredging for the best operational outcome.

As Wellington is a naturally deep harbour, no deepening is required in the main harbour basin and the overall volume proposed to be removed is less than at other ports to achieve the same outcomes.

At the harbour entrance consents are being sought that would allow the port to remove up to 6.0 million cubic metres of seabed sediment.

The proposed disposal site is off Fitzroy Bay, in water approximately 50 metres deep.  This site is a refinement of the existing consented disposal area.

The main container berth and northern approach at Thorndon Container Wharf would also be deepened, with placement of that material, up to 270,000 cubic metres, in deeper water near the berth.

Alternatives for disposal have, and will continue to be considered [hopefully].

Once again the Guardians’ concerns with regard to the inadequacy of the information and therefore the flimsy nature of the business case has been endorsed, this time by an international expert.

Isn’t it high time that we start listening to some experts other than the shills paid by the airport? But – you will say (if you are Justin Lester) – these are just shills paid by Air New Zealand, who clearly have a nefarious “Anti-Wellington” agenda! Well, we find it hard to argue that Montie Brewer can be accused of an “Anti-Wellington” agenda, seeing he is an actual world expert (not like InterVISTAS who get paid to lobby) and doesn’t have any skin in the game either way.

What is so incredibly disconcerting to us is that none of the Councillors who are so willing to throw our taxpayer money at this have read any of the reports! Not even the discredited, half-baked ones that the airport did which they paid for with our money! Cause anyone who reads these reports – and the many retorts against their validity – can make up their own mind pretty quickly about how well the data was collected or how far the facts have been stretched by wild guesswork and extrapolation.

Just tell us this – Justin Lester et al: Why does the Council, which is a 34% shareholder of the airport, yet gets little over 10% of the profits (thanks to some very creative accounting), pay half of all costs even though the most optimistic, discredited cost-benefit analysis says it will only get a third of the benefits – in 45 years!? This is utter insanity and needs to stop. You are not entitled to gamble with our money and give corporate handouts to a billion dollar company without doing your research first and at least insist on a proper business case that stacks up!

You and Andy Foster saying that a ‘nudge, wink’ promise from an airline will be enough for you to commit $90m of our money to this white elephant is insanity. We can only imagine how much Infratil, the airport and international airlines laugh every time after you leave the room. Please, just once, read what Montie (or Ian, or Keith, or Michael, or Brian) has to say and make up your mind based on facts not what the big boys in the business suits promise you in secret handshake deals!

From: Air NZ brings international expert to warn on Wellington runway extension

Promoters of the Wellington airport runway extension are mistaken to expect that building it will be enough to attract airlines to establish new long-haul routes to the capital, says an international airline expert brought to New Zealand by one of the project’s biggest critics, Air New Zealand.

Montie Brewer, a former chief executive of Air Canada who sits on the boards of Irish airline Aer Lingus and Swiss International Airlines, said New Zealand is risky for global carriers because of its distance from major long-haul destinations. They would be more likely to increase service frequency and plane sizes through established routes into Auckland before looking even to Christchurch, let alone Wellington, he said.

“I’m not a Yank coming down here to tell you it’s a dumb idea,” he told BusinessDesk but warned there was a high risk that “no one’s going to use that runway”, meaning existing users would end up paying for it, risking higher airfares.

“If you’re trying to build this to entice a planner to decide to fly here, you would probably do best to talk to some planners first.”

Owned 66/33 by NZX-listed infrastructure investor Infratil and Wellington City Council, Wellington International Airport is pursuing the majority of funding for the $300 million project from the council and central government and is working on a business case to demonstrate it would pay for itself through increased economic activity.

While modelling undertaken for WIAL by global air route consultancy INTERVistas used “the right process”, the rates of passenger growth it projected were “quite low” and unattractive compared to other global opportunities, said Brewer.

“When you look at the list (of possible new services), New Zealand doesn’t come up on that list very well,” he said. It tended to be a leisure rather than a business traveller’s market, so potential customers were more focused on price than convenience and there was a limited domestic outbound market compared to alternatives.

“I might think I need to have New Zealand in my portfolio, but not in the same way as London, Tokyo or Paris. It’s not like my customers are complaining about not being able to connect through Christchurch. That’s not my customer. That’s Air New Zealand’s problem.”

He praised Wellington airport success for its new service to Singapore via Canberra, which he said Air New Zealand wouldn’t like because airfares to Singapore would fall, but the Singapore Airlines service starting on Sept. 1 was being achieved without the runway extension.

“You can fly wide-bodied jets across the Tasman already,” he said. Globally, airline economics meant that “if you are in any non-hub city, competition is via different gateways.”

An international carrier would “creep up” on services to New Zealand and would most likely target Auckland first, as a known quantity with plenty of competing short haul carriers able to take its passengers to onward locations, at first using “the smallest possible airplane”, such as a Boeing 787 Dreamliner.

“If there’s more demand to come down here, they’ll put on a 777, then a 777-300. They can handle all the demand into New Zealand for the next five to 15 years by up-gauging their current aircraft.”

If bookings from one gateway in their home country were strong, the next likely move would be to fly to Auckland from a second gateway rather than targeting a second New Zealand destination, which could harm the profitability of existing services to Auckland. At that point, it would also consider whether other routes altogether were more attractive.

“I’m thinking about Athens, Denver, wherever. You’re competing with the whole rest of the world.”