Flights of fancy mark Infratil airport battle

by Shoeshine

Friday 13th February 2004

When an airport company takes to worrying publicly about endangered birdlife you have to suspect there is some serious money at stake.

That's why Auckland International Airport's submission on the future of the Whenuapai airbase is such an interesting and, at times, amusing read.

The striking thing about the submissions from Auckland Airport and Infratil, the infrastructure investor that wants to turn Whenuapai into Auckland's second commercial airport, is the difference in their brute sizes.

Infratil and its partner, the Waitakere City Council, put forward their case in a succinct 24 pages.

Auckland Airport has put out a document with which you could club a mammoth. It runs to 66 pages, plus 44 pages of appendices in the form of three "independent" reports.

Auckland Airport seems in fact to have more confidence in Whenuapai's commercial viability than do the partners. Infratil's submission is that, should Whenuapai not work out, the government will get the land back to do with as it pleases.

Unsurprisingly the process has attracted a huge number of submissions more than 2000 in the first round.

The Defence Force, which is organising the consultation phase, is holding a series of public meetings over the next two weeks.

It will analyse submissions and feedback and make a recommendation to the Cabinet by the end of March so a decision should be due around mid-year if the matter isn't sent back for further assessment.

The Infratil-council proposal is that commercial flying should start on a small scale alongside military use and build up over the next five years as the Air Force shifts its operations gradually down to the Ohakea base.

They see an alternative to Auckland Airport as being attractive to low-cost carriers such as Origin Pacific, Air New Zealand's Freedom and Virgin Blue's Pacific Blue.

Passengers bound for domestic destinations, East Coast Australia and Pacific islands will be taking the low cost option so won't mind the airport's simple facilities.

It will also, the partners argue, be more accessible than Auckland Airport for up to 520,000 Aucklanders given population growth projections and existing transport infrastructure.

The Infratil-council agreement calls for Infratil to provide all the management and funding for the operation. Infratil expects to invest $50 million initially to bring the airport up to Civil Aviation Authority standards and establish aeronautical facilities.

The council has an option over the first seven years to take up a 33% shareholding at a price that would give Infratil a 10% return on funds invested.

The government, Infratil points out, would not be required to bear any commercial risk and would be able to proceed with Plan B if the airport didn't pan out.

All the government has to do is to give the partners "a long-term lease," no details given, over all or most of the airport.

The business case is that low-cost airlines are the growth part of the aviation market and that carriers "are not being effectively accommodated" by Auckland Airport.

"An irony of Auckland International Airport's recent growth surge from full service carriers such as Emirates is that it has not been able to accommodate Pacific Blue, which has been the highest-growth airline in Australasia since setting up a little over three years ago," the submission interestingly argues.

Not so, says Auckland Airport.

Its opposition takes a three-pronged approach.

It argues, a second airport isn't needed; its land use development plan shows the current site can meet all foreseeable demands for the next 50 years.

Whenuapai would unnecessarily duplicate the infrastructure it already has in place.

Backing up that argument is a study by Ernst & Young Corporate Finance.

This argues essentially that the low-cost carrier airport approach is worth $128 million assuming the 145ha of land not now needed for aeronautical purposes is sold or developed for commercial and other uses.

But a further $24 million of value could be released if the entire site were made available for market-driven development, taking the total value to $152 million.

What's more, EYCF argues, the capital value of properties likely to be affected by increased noise levels under a commercial scenario is $496 million. The reduction in that value could be $18 million to $53 million or $52 million to $155 million if the market is already pricing in the commercial airport scenario.

Auckland Airport's third line of attack was to commission consultancy Boffa Miskell to produce an alternative "environmental and urban design contextual analysis and vision" for the site.

Shoeshine suspects this bears the fingerprints of Auckland Airport's PR people.

Attempting to press all the Cabinet's buttons in one hit, it offers "the largest built green development in New Zealand," in which residents, from the film industry perhaps, will frolic along "tree-lined boulevards with vehicular, cycle, and pedestrian routes."

This urban Shangri-La will save the threatened (their emphasis) secretive coastal fringe birds that lurk in the saline vegetation near the eastern end of the existing main runway.

Shoeshine, although no ornithologist, suspects the birds would prefer the airplanes, which are at least fellow fliers, to the onslaught of jetskis, rubbish-dumpers and curious children an urban development would surely bring.

In any case, Auckland Airport shareholders shouldn't get too het up.

An analysis by First New Zealand Capital gives Infratil a very low probability of success.

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