We Love Wakatipu commentary

We hear from councillors that Queenstown Airport Corporation need until October to come up with their post Covid-19 survival strategy. Which is why Mayor Jim Boult is pushing for the draft statement of intent to be agreed to at next Thursday’s videoconference council meeting, instead of allowing the usual 2 ½ months’ strategy discussion, feedback and finalisation before the final SOI is due.

This draft SOI became “almost immediately irrelevant,” according to a Facebook comment posted by one of the councillors on the SOI steering group.

There are several problems with this hands-off governance approach, as already covered in previous WLW posts.

Here we concentrate on just two – the gulf in expectation and performance of QAC versus their minority shareholder, Auckland International Airport, and the total silence on survival plans from QAC compared to the information available from AIA.

We all know via multiple media reports that AIA has stopped $2 billion worth of development programmes, launched a $1.2 billion capital raising project to ensure its ability to survive even the worst scenario until end of financial year 2021, reduced rentals to support tenants’ survival and many other facets of its recovery plan.

As CEO Adrian Littlewood said in this Newsroom article, “Business-as-usual disappeared overnight. Our new version of business-as-usual has formed pretty quickly and pretty well.”  You can check it out – with financial forecasts, situational risks et cetera all outlined – on this Auckland International Airport share purchase presentation link .

This strategic agility is also shown by Webjet, whose Queenstown-based chairman Roger Sharp says their over $4 billion annual turnover went to practically zero in just three weeks. “We jumped into gear very quickly, reduced our cost base by nearly 50% and raised $350 million to weather the storm… We aren’t Robinson Crusoe; everyone in the industry is doing the same thing.”

Contrast this with the total silence so far from either Queenstown Airport Corporation executive team or board in terms of reflecting the changed business environment and their consequent recovery strategy into this year’s SOI. A strategy that apparently will take this highly qualified and well remunerated team until late October to develop.

Should this approach be accepted by council, as controlling shareholder, on our community’s behalf?

If councillors do the mayor’s bidding, then this total opacity of QAC’s response to Covid-19 remains until late October.

The SOI process is the only legally mandated opportunity for our councillors and community to have visibility of QAC’s strategy, objectives, financial instruments and the subsequent risks and opportunities for our council and community as majority shareholders.

In the absence of analysis or information from QAC, WLW supporter and economist John Hilhorst developed this QAC budget tool to help QAC, councillors and community understand the impact of different scenarios.  You can fill in different assumptions (such as percentage of loss of international and domestic visitors, for how long and so on) to see what impact these would have on QAC’s cash flow and EBITDA. 

As we have pointed out, the business survival strategy that QAC’s executive team and board must surely now be developing is the essence of an SOI. The least we – and our council – should expect is that they can do this by June 30.

There is provision in the law for QAC to regularly update the SOI after 30 June to reflect ongoing changes in the business environment if needed. And council, having already given QAC one month extra to prepare this year’s SOI, has the legal option to extend this deadline to July 31.