Airport Governance 101

Dear candidates,

We Love Wakatipu Inc (a.k.a. Protect Queenstown) congratulates each one of you on standing for council. We take this opportunity to briefly review with you our council’s governance of Queenstown Airport Corporation over this past term and ask you to please respond on how you would deal with these issues if elected. We will be sharing all responses with our WLW database and others.

We start with a background summary and then follow with our questions.

Background

Air Noise Boundaries

In 2018, Queenstown Airport Corporation proposed an expansion to the ZQN Air Noise Boundaries and asked for the public’s response. More than 90% of the submissions opposed expansion, a reaction to the many downstream ramifications of over-tourism being felt (pre-Covid).

This opposition has remained strong in every feedback opportunity since. 

Dual Airport strategy

Last year, Queenstown Lakes District Council’s illegal 100-year lease of Wanaka Airport to QAC was overturned, spelling at least a temporary end to QAC’s “dual airport” strategy. This was achieved by the Wānaka Stakeholders Group taking council to the High Court to force proper democratic process, at huge cost to both the Wanaka community group and ratepayers. Council’s leadership team had refused offers of discussion with WSG that might have led to a better, certainly cheaper, resolution.

Under QAC’s dual airport strategy, a new international airport to be built at Wanaka was going to absorb demand above the 5.1 million passengers a year then being targeted for Queenstown Airport.

Council control

Under the Local Government Act, council can control the strategic objectives, both financial and non-financial, of Queenstown Airport Corporation and also, the nature and scope of QAC’s activities. The legal tools to do this are council’s statement of expectations (SoE) for QAC and QAC’s resultant statement of intent (SoI). 

Council’s senior leadership team has instead actively discouraged councillors from doing so, with agendas giving incorrect and/or incomplete information as to the legal power they have to do so. Unfortunately, over the past term most councillors have obeyed this dictate, instead of using their legal power to better represent their constituents’ interests. 

The vexed process of control

This year, Crs Shaw, Gladding and Whitehead pushed for amendments to the senior management team’s draft SoE to ensure greater governance control over QAC. These included:

• a council-controlled legal review of QAC’s constitution,
• a governance manual outlining proper process (such having been ignored for the previous three years),
• Council sign-off of both the 10-year Strategic Plan and Airport Master Plan,
• council-led consultation on these plans, and
• no ANB expansion for the next decade (this had already been offered by QAC, but curiously the staff draft did not include it).

QAC pushed back against council’s explicit instructions and refused to give council the right of final approval of these two integral planning documents for this central community asset.

Under the Local Government Act, Councillors have the right (as the ‘supermajority’ owner of this council-controlled trading organisation) to insist QAC follow their governance direction, and QAC must comply.

But staff chose to not so advise them, and the majority of councillors voted not to. When the final vote came, only Crs Smith, Shaw, Gladding and Whitehead voted to stand by councillors’ previous unanimous call for QAC to require their agreement to the strategic and master plans.

You can read in this article the clear result of such lax governance – QAC totally ignoring both council’s explicit governance instructions and our community.

Council staff also pushed back when some councillors called for a council-led legal review of QAC’s constitution, saying a review had already been done and it would cost a lot of money. 

At the February 2022 council meeting, council CEO Mike Theelen told councillors he had already okayed a review done by QAC. Councillors didn’t know about this review, because Mr Theelen had not bothered to tell them about it or forward it to them.

He further told councillors at this meeting that QAC had declared it “fit for purpose”. The question is, whose purpose?

Why council’s governance of QAC matters

Because remember, it was a one-sentence modification to QAC’s statement of intent that allowed QAC to sell 24.99% of our airport to Auckland International Airport Ltd in 2010, without councillor knowledge or permission.[1] QAC’s secret agreement with AIAL also committed their board to persuade council to increase AIAL’s shareholding to 35%. This would have removed QLDC’s supermajority shareholder status and, therefore, our community’s ability to control QAC.

Under the Companies Act, a council-led legal review of the QAC constitution could result in an amendment requiring it to act in QLDC’s interests, not QAC’s. That would make clear the purpose of QAC as a council-controlled trading organisation was to maximise community, economic, environmental and social well-being of the Queenstown Lakes community, not QAC profit or growth aspirations.

[1] The Council had considered QAC’s draft statement of intent at a workshop in March 2010. The draft SOI did not mention raising capital or the proposed issue of shares. It said, “No capital injections from the shareholders are expected in the current period.” In late June 2010, QAC amended the draft statement of intent to say, “The company will consider the need for and source of capital subscriptions as may be required.” Councillors were given the final statement of intent with their agenda for the June meeting, but the late change in the 24-page document was not pointed out to them. A week later, on 7 July 2010, the QAC Board sold 24.99% of the company to Auckland Airport. Councillors were briefed after the transaction at 4 pm that day.

From the Auditor General’s report

Threat or opportunity?

More recently, the airport picture has been broadened by Christchurch International Airport’s proposal for an international airport at Tarras. QLDC has no control over this proposal or the process that will determine whether it goes ahead. Council has refused to investigate opportunities that a Tarras airport might open for its own Spatial Plan (which identifies Frankton Flats as the basin’s future ‘principal metropolitan centre’) or how it might fit QAC’s own dual airport strategy. It has instead instructed QAC to compete vigorously against the proposal.