Wellington airport hits back at NZIER runway extension critique

Monday 15th February 2016

Wellington International Airport has hit back at analysis of its runway extension project by the New Zealand Institute of Economic Research, saying the critique undertaken for airlines opposing the $300 million project has overstated the number of routes proposed and used unreasonably low estimates of the value of tourists to New Zealand.

The Board of Airline Representatives released the NZIER analysis overnight as the main element of its submission that the 350 metre extension is "highly speculative and should not proceed."

NZIER based its conclusions on analysing seven potential routes to the Middle East, Asia and the US west coast, but airport spokesman Greg Thomas told BusinessDesk in an email that its consultants had based their findings in favour of the runway extension's viability on far fewer routes.

"World route development experts InterVISTAS have confirmed viable long haul routes from Wellington starting with a daily service (not seven as BARNZ have suggested), growing to four services by 2035 – similar to what Christchurch already has today," said Thomas. The NZIER analysis suggested only one of seven routes mooted as having potential would be commercially viable - a Wellington-Singapore route.

The airport also took issue with NZIER’s suggestion that the economic value to New Zealand of each additional tourist is overstated in the cost-benefit analysis conducted for the airport by Wellington economic consultancy Sapere, released in draft form late last year.

NZIER's "estimate that each additional tourist would add just $160 of economic benefit is massively disproportionate to the Ministry of Business Innovation and Employment guidelines for determining the net benefits that New Zealand derives from international visitors to New Zealand," said Thomas. "The draft CBA implied a conservative value of $246 for each visitor, a figure which the MBIE analysis and other commentators have suggested is too low."

NZIER also suggested InterVISTAS's estimates "grossly overstate likely visitor arrivals", especially from China, because of the likely tailing off in visitor growth caused by the maturing of those markets and the falling spending power of Chinese households as the country's huge population rapidly ages.

"InterVISTAS have already taken into account that China's growth rate will slow and conducted extensive risk analysis on their modelling of the Wellington market," said Thomas. "The total market projections for growth in passenger numbers through Wellington are an average annual rate of 2.4%, which is very close to the airport’s historical growth rate."

Owned 66:33 by infrastructure investor Infratil and the Wellington City Council, WIAL is seeking both central and local government funding for the majority of the cost of the proposed extension and is currently preparing a full business case following public consultation on the proposal. At this stage, the WCC is supporting funding for the studies and resource consent process, but government ministers are lukewarm.

Prime Minister John Key told reporters after his state of the nation speech on Jan. 27 that "we haven’t ruled out funding it but we have to have confidence it is commercially viable. It is not a closed door at this point."

BusinessDesk.co.nz

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