Newsroom, 17 September 2020
“The mysterious Central Otago airport no one seems to want” is the title of freelance journalist Jill Herron’s piece in Newsroom, citing aspiring MP candidates, neighbours of the potential Tarras Airport site and the mayor of the district whose two airports would face competition from the mooted international airport.
Compare with National Business Review article of 14 August and ODT of same date, filed below.
Extracts from “Review of Auckland Council’s council-controlled organisations: report of independent panel” July 2020
Miriam Dean QC led an independent review of Auckland Council’s council-controlled organisations, published in July this year.
Many of the points made apply to Queenstown Lakes District Council and Queenstown Airport Corporation – especially in the lack of strategic guidance, accountability, governance and meaningful dialogue between the two. Here are some pertinent extracts from the overview. If you would like to read the full report, here is the link.
“The council has the means to make two significant improvements to the model generally. One is to give CCOs clear strategic direction (which would enable them to translate the council’s high-level plans into practical work programmes) and the other is to give CCOs guidance on how to strike a balance between commercial and public interests (which would eliminate a good deal of the criticism levelled at CCOs by the public).
Too much has been made of the notion that CCOs are commercial entities. They are not. Some of their activities are commercial in nature and they must often exercise commercial judgement and business expertise, but at heart they are community-owned entities that exist to provide services to those who partly or wholly fund them – Aucklanders. As a result, they must be more conscious of community expectations and appropriately balance commercial and public interests…”
“One of our main tasks was to consider whether CCOs are sufficiently accountable to the council and the community. The short answer is the council has all the necessary levers at hand to ensure accountability, but it is not using them effectively – and in one important respect, not at all. Yet strong accountability (including transparency) is at the heart of good local government – and it also goes both ways. The council’s many plans, policies and strategies offer almost no practical strategic direction to CCOs. They do not contain careful, detailed information about the council’s expectations of CCOs so they can set their work programmes and priorities accordingly…”
“The accountability mechanisms themselves are not without problems either. Letters of expectation, for example, are too vague and fail to give CCOs adequate guidance in preparing their statements of intent. CCOs’ statements of intent vary enormously in length, clarity, presentation and performance measures and are poorly aligned to CCOs’ activities and objectives. CCOs’ reporting to the council is also variable and is missing vigorous discussion of their performance…”
“The council’s governance of, and liaison with, CCOs is not working as it should. Problems include a failure to recognise the importance of relationships with CCOs; a lack of commitment by some councillors to attending CCO induction days, workshops and other opportunities to learn more about their businesses; forums that do not encourage free and frank conversations; poor and patchy information flows; insufficient support for councillors in holding CCOs to account; and insufficient resources for the council unit charged with monitoring CCOs’ activities and budgets, which are considerable.
Finally, there is insufficient face-to-face discussion and meaningful dialogue between CCOs and the governing body, especially in relation to the council’s strategic planning processes for CCOs. No amount of mechanisms will make accountability work – it takes people, and relationships between people, to achieve this…”
QAC Annual Report, Otago Daily Times 21 August, 2020, and Sydney Airport information
On the same day that ODT’s business page gave saturation coverage to negative airport and airline news, Queenstown Airport Corporation released its annual plan stating that its financial position, as at 30 June, “remains strong”.
Admittedly, also at that time, QAC was planning to pay shareholders (QLDC and Auckland Airport) a final $7.295 million dividend. On August 19, it decided not to. The figure is still included in the annual report. The only surprise is that this decision took so long.
Mind you, QAC apparently require seven months to develop a Covid 19 survival strategy, which other airports (like Auckland and Sydney) had developed within weeks.
ODT’s three “business and money” page stories on August 21 were entitled “Auckland Airport profit hit hard”, “Qantas braced for extreme turbulence” and “Staff reduced 24% during, post lockdown,” featuring Covid’s impacts on Dunedin airport.
Ten days earlier, Sydney Airport opened a $2 billion retail entitlement offering, to raise funds from shareholders.
Hopefully, soon if not yet, councillors and especially the joint QLDC – QAC steering group will know a whole lot more about the financial status of QAC than we do from their annual report. And, not holding our breath, but maybe our councillors will have even provided the strategic objectives they want QAC to achieve, as per the Local Government Act.
As far as we know, discussions between councillors and QAC about the QAC statement of intent, due late October, haven’t even begun yet. Remember, QAC is supposedly a council-controlled trading organisation…
Meanwhile, this is the link to the full annual report and here are some interesting tidbits:
- “As at 30 June 2020, the company’s financial position remains strong, with term debt totalling $69.0 million representing 23.5% of net assets. The equity ratio (total shareholders’ funds to tangible assets) was 74.6% and interest coverage ratio (EBITDA/finance costs) is 11.9 times.”
- During the year, QAC decreased its banking facilities from $220 million to $140 million, sourced from four major banks, secured by company assets, undertakings and any uncalled capital. It has already taken up half of its $30 million debt facility with the Bank of China. Debt currently stands at $69 million.
- In its amortisation calculation, it defines the “useful life” of the air noise boundaries (ANB) as 6 to 9 years. We have asked QLDC CEO Mike Theelen to clarify whether this means QAC now believes the existing ANB has this much life left. (Remembering that QAC calculations have not included the capacity and noise technology improvements that already exist, which would allow them to smash their PAX targets within the existing ANB…)
- A $1million interim dividend was paid in February, three quarters of which would have gone to QLDC. Page 43 acknowledged as a “subsequent event” that the remaining expected $7.295 million dividend had not and would not be paid.
- QAC paid $491,000 rates to QLDC in 2020. We wonder how this compares to other businesses with similar footprints?
- QAC has so far incurred about $310,000 in legal costs for the Wanaka Stakeholders Group Judicial Review (of the Wanaka Airport lease, which starts in court on September 21) and forecasts “significant costs in the future”. Remember that QAC is the second respondent in this case – so QLDC, as first respondent, is likely to have at least equivalent legal bills. And remember that ratepayers are effectively footing both bills.
- QAC paid $7.1 million in staff and directors’ costs, up from $6.3 million in 2019. CEO Colin Keel’s salary went up to $580,000 before we are told he took a 20% Covid related pay cut, though when this reduction would be valid until is not known.
- $18.4 million is included as payment for the 16 ha Lot Six, the subject of a decade-long fight settled recently through the Public Works Act, but compulsory arbitration will settle the price if this is not accepted by previous owner Remarkables Park. Initial media reports quoted Remarkables Park as saying they were undecided, and “certainly cannot understand the offer”.
- Minimal mention of climate change mitigation.
- QAC says they have “put on hold” further developing their preferred dual airport approach for Queenstown and Wanaka airports, “awaiting the outcome of the Economic and Social Impact Assessment, as commissioned by QLDC “. It is understood councillors haven’t even discussed this MartinJenkins report yet. QAC might be wise to also hold off until after the Judicial Review response to the Wanaka Airport lease issue.
- And their response to Christchurch International Airport’s purchase of 750 ha to develop a new international airport on rural land near Tarras? “The timing of the proposed development is not known, and it is not expected to have an impact on the Company’s trading performance for the immediate future.”
As 75.01% owners of QAC, ratepayers will no doubt be interested in the impact of this proposed development beyond the “immediate future”.
What about the potential both for long-term pain (as airlines choose to switch to the safer, cheaper, quicker and more reliable Tarras Airport, as already advocated by Air New Zealand) and long-term gain (reference the FlightPlan2050 proposal for an urban campus on ZQN’s Frankton Flats land, freeing up some $900million for QLDC and substantially increasing rates take)?
National Business Review, 14 August 2020
Christchurch International Airport Ltd’s announcement of their proposal to build an international airport at Tarras has set a rather large and interesting cat among the pigeons.
This issue was always larger than QLDC and QAC, but the current council’s preference for turbocharging last century’s business as usual, bums on seats tourism model – regardless of its manifold ramifications and limits – will surely be coming more under the microscope.
Because with Tarras, players now include four councils, two electorates, multiple communities and three competing airports, two of which are majority-council owned and one with the government as shareholder too.
Following the last two days’ flurry of PR from QAC chair and QLDC Mayor, exposing their entrenched positions, here is a piece from FlightPlan2050, who have been trying to persuade both entities of the logic of their argument to instead use ZQN’s Frankton Flat’s invaluable land to build a well-designed, urban campus.
QLDC and QAC have had this information for over a year and have so far not responded, beyond the mayor’s statement that it was “the silliest idea” he had heard. Obviously CIAL don’t agree. And nor did the mayor’s MartinJenkins report, which identified it as offering the best long-term prosperity and connectivity for the district.
As this article is behind the National Business Review paywall, for those who don’t have a subscription we have reprinted it below with permission.
Tarras airport allows new vision for Queenstown
Shifting Queenstown’s airport would release land ideal for urban development
The Tarras Airport initiative from Christchurch International Airport Ltd presents an enormous opportunity for both business and the environment.
But only if coordinated with the closure of Queenstown Airport to unlock ZQN’s land value and urban potential, allowing Queenstown Lakes’ economy to diversify and both emissions and business costs to be reduced.
Closure of Queenstown Airport would release more than $1.2 billion land value that could be returned to QAC’s owners, providing a massive $900 million to Queenstown Lakes District Council and $300 million to Auckland International Airport Ltd, for its $27.7 million investment in 2010.
This $900 million would enable unprecedented investment by QLDC into the infrastructure and community amenities the district needs. Instead, the Council is currently cap in hand to the government for $278 million of taxpayer funds and is scheduling a bed tax to raise a further $374 million over 10 years for such investment.
Further expansion of Queenstown Airport is constrained by mountains, urban encroachment and limits to safe operation. Air New Zealand called for a new regional airport in its submissions to Queenstown Airport Corp in 2018, but QAC has instead pursued a dual-airport plan that includes development of a second international airport at Wānaka.
The dual airport model is fundamentally flawed, whether the overflow were to go to Wānaka or Tarras.
All the ancillary businesses within the air-travel sector – from airlines and airport shops to vehicle rentals and supply logistics – would be worse off. They would be forced to either operate from two sites or to lose market share. With two sites, companies would face higher capital, operational and employment costs, structurally undermining the profitability – and therefore wages and salaries – of the whole air-transport sector of this region. The more than 100 businesses and 1000 people employed would be made worse off, and this structural disadvantage would be baked into the system forever.
A single regional airport in Tarras would be superior to any alternative outcome. ZQN has become a regional hub, with QAC data showing fewer than half of air travellers actually destined for the Wakatipu. Wānaka, the upper Clutha and Central Otago provide half ZQN’s catchment. Tarras would have significantly lower lease and property costs for all associated businesses and would centralise the region’s supply logistics to Cromwell, a trend already well established.
By 2038, Queenstown’s population is forecast to double from the current 40,000 normally resident. A high-density campus on the only sunny, flat and central location in the Wakatipu Basin would enable urban development to be concentrated onto Frankton Flats. Versus the status quo of high-emission and environmentally damaging, developer-led urban sprawl, congested roads and thinly spread infrastructure networks that increasingly erode this outstanding natural landscape.
Urban concentration, as this proposal would enable, is also key to achieving economic diversification to the higher-value, knowledge-based businesses that many locals are calling for. Knowledge economies require the geographic concentration of skilled people, something that dispersed tourism development fails to achieve. A cleverly designed, high-density campus on Frankton Flats could become, as Sir Paul Callaghan extolled, “a place where talent wants to live.”
Such economic diversification to high-income sectors would help pivot away from low-value “bums on seats” tourism. And a Tarras Airport would better distribute the benefits and impacts of tourism to the wider region, as Tourism Industry Aotearoa advocates.
A single airport at Tarras would systemically improve the region’s housing affordability. More than a thousand workers could relocate away from New Zealand’s most expensive centre to more affordable townships. Densification of Frankton Flats would also offer construction and infrastructure economies, reducing carbon footprint per person and enabling lower build costs per dwelling. Council control could ensure an appropriate range of accommodation options.
Frankton Flats is the centre of the Wakatipu’s transport network and its densification would better enable district-wide public transport. It would also let a significant population live in a walkable urban environment, with all the commercial and community amenities they need, without reliance on private vehicles.
The existing helicopter operations could continue from a transport hub on Frankton Flats. Fixed-wing GA could be relocated to Kingston Aerodrome or a new facility on Queenstown Hill, with required investment available from the sale of ZQN’s Frankton land.
The distance from Queenstown to Tarras is acceptable. It is closer than airports to many international resorts, like Chamonix and Whistler, with the inevitable conclusion that relocation of the airport to an hour’s drive from Queenstown would not collapse our tourism economy.
Resolving future air connectivity for this region now involves four councils, two electorates, multiple communities and three competing airports, two being majority-council owned. These entities operate in disconnected silos with little interest, capacity or mandate to work together to deliver a cohesive or sensible outcome for the region – much less New Zealand. It is time for central government to take a leadership role.
The Tarras Airport proposal is a natural candidate for the expedited Covid-response resource consent process, in terms of potential construction jobs and resetting national infrastructure spend for the greatest economic, environmental and community long-term benefits.
Two international airports within an hour of each other would not meet such a test. Nor would continuing with an airport so severely constrained by topography, community opposition, safety issues and thousands of neighbours when the land could be put to much better use.
Instead of doubling down on last century’s “business-as-usual” thinking, this is a time to be open-minded, to look beyond self and business interest, and to consider the whole community, region and national infrastructure network. I encourage people to seriously explore these ideas.
By John Hilhorst, a member of the FlightPlan2050 group promoting an alternative development plan for Queenstown.
Otago Daily Times, 14 August 2020
The proposed Tarras Airport runway length of 2.2kms is what is needed by the Honeywell SmartPath technology that allows planes to land unassisted in fog. So it is a bit of a worry if the “one thing” Jim Boult can tell us as an ex-airport CEO is that fog is a problem. Because it isn’t.
And how come our mayor’s concern for the “good folk of Tarras” doesn’t stretch to the thousands of his own ratepayers who have clearly expressed their strong opposition to air noise boundary (ANB)expansion at ZQN?
Or the 4000 people who would lose their existing private property rights under this proposal? And if there’s no pressure on the ANB because of Covid – why is he still advocating ANB expansion? As he has at every vote to date, the only councillor to do so? Despite knowing that it’s not needed because existing plane design would allow many more passengers than QAC is publicly targeting.
23 July 2020
Good afternoon everyone. I’m Cath Gilmour, speaking for We Love Wakatipu Inc.
Christchurch Airport has certainly thrown a very large, feral cat among the pigeons. Having a competing airport more than four times the size of ZQN within an hour and without any of the constraints of topography, safety, close proximity of thousands of neighbours and strong community opposition adds a much greater, long term complexity to QAC’s strategic planning.
If QAC needed seven months to create a new SOI for post Covid survival, how much longer will they need to deal with both Covid and Christchurch Airport’s plans?
Some points for councillors to consider during this next SOI process;
- This should take QAC’s push for air noise boundary expansion off the table, for ever.
- If – for some unfathomable reason – QAC continues to include expansion in the next SOI, you need evidence of why, when you know they can host far more than 5.1 million passengers with existing plane capacity and noise technology.
- It inherently makes no sense – for our region, our country or climate change – to have three international airports within an hour of each other.
- The multiple benefits of a relocated airport have been pointed out to you by FlightPlan2050 for over a year but dismissed by the Mayor as “one of the silliest ideas” he had ever heard.
- Unfortunately, by Christchurch Airport stealing this strategic march on QAC and QLDC, our community loses the economic benefits and the opportunity to control the triggers of growth we could have had from building this new airport.
- Air New Zealand’s former CEO Christopher Luxon clearly stated their preference for a safer and less constrained Central Otago airport. The current COO gave further support in media today.
- Compared to Covid, the long-term loss of flights and airlines to this airport should be sending shivers down QAC’s collective spine.
- Then add to this the fact that the current SOI’s property acquisition fund contains less than half the likely $100 million plus price tag of Lot 6.
- Your financial governance role of QAC has never been so important. Please exercise it.
- Both QLDC and QAC must surely by now be questioning the long-term viability of using this valuable Frankton Flats land for an airport that will never escape its constraints of topography, community opposition and proximity to thousands of residents.
- It is fortuitous QAC’s new chair has such a strong planning background. It will be needed as QAC, council and community pivot to a more sustainable, productive and positive use of this land. This is where we stand to gain from Christchurch Airport’s strategic win. FlightPlan2050 have reiterated this opportunity, I need not.
- You shouldn’t presume the new airport’s planning process will take a long time. As a project of national infrastructural significance that would help post-Covid economic recovery, this is a natural candidate for the expedited system.
- It is critical this discussion is fed in – now – to Council’s spatial and long-term planning. And that you include our community. Because the changes at stake are huge and potentially really positive, but alternative uses for ZQN land were expressly and deliberately excluded from community planning workshops.
- Our community has called for a reset.
- This must surely be the trigger.
- Thank you for listening – and I look forward to seeing you at the participative democracy discussions you have all been invited to next Thursday.
Otago Daily Times, 22 July 2020
It seems Queenstown Airport Corporation and Queenstown Lakes District Council may have been caught on the back foot by the airport company Mayor Jim Boult used to be CEO of…
And we ratepayers are likely to lose out big time as a result, as the investment benefits flow to Christchurch City Council coffers, not QLDC’s.
Christchurch Airport today announced it has already spent $45 million buying land for a jet capable runway, to design and build one of the world’s most sustainable airports.
Queenstown lobby group FlightPlan2050 proposed QAC relocate Queenstown Airport to the Tarras/Luggage area – with ZQN land to be redeveloped as a smart, connected Alpine city – in March last year. Mayor Boult slammed the idea as “one of the silliest ideas” he had ever heard.
FlightPlan2050’s subsequent investigations have shown the Tarras area would be a far more sustainable, profitable long-term airport than ZQN, without the safety, logistical, traffic and community opposition issues ZQN faces.
What a pity our mayor, councillors, council executive team and QAC didn’t have the foresight Christchurch Airport has – or were even prepared to open their minds to the idea.
Queenstown – future as an Alpine city? FlightPlan2050 vision document, June 2020
The first of three reports prepared by FlightPlan2050, this vision document outlines the proposal to transform Frankton Flats from an airport to a well-designed and connected smart city centre first proposed at a public meeting in Frankton in April 2019.
MartinJenkins’ economic and social impact report into airport growth scenarios found considerable public support for relocation of ZQN, despite its scenario not including the positives to be gained from freeing up ZQN land.
FlightPlan2050 will release its more detailed documents over coming months, to feed into the community conversation about how to achieve a positive, resilient and sustainable future for Queenstown Lakes in the new economic and social reality of Covid.
Crux, 7 July 2020
We Love Wakatipu Inc has been raising concerns about the debt loading Queenstown Airport Corporation will face, particularly with the now compulsory purchase of Lot 6, for months.
Council’s official information act responses to us have revealed they have done no political or financial analysis of these risks. Our concerns about this (and other financial governance inadequacies) have been dismissed and/or ignored.
Similar dismissal has been meted out to Crs Shaw and Gladding when they have raised their concerns about council’s lack of financial governance oversight.
Crux here raises these concerns again. And again, dismissed.
25 June 2020
Good afternoon councillors, nice to see you off screen. I’m Cath Gilmour, chair of We Love Wakatipu Inc.
Usually at this meeting you would be agreeing, or not, to QAC’s statement of intent.
Instead, you are starting the process to shape QAC’s third SOI in under a year – the previous two having been agreed to with serious caveats – six months late then two months early. (December 2019, April 2020, October 2020)
It was good to hear Cr Quentin Smith push back against QAC’s suggestion that the joint steering group need not meet til late August, a timeline designed to sideline councillors.
When the QAC-QLDC group was set up, we expressed concerns about loss of transparency and the potential for excluding other councillors through this process.
We hope the next four months and the resultant SOI will prove our concerns to be wrong.
Under the Local Government Act, (section 59) the principal objective of QAC is to achieve its shareholders’ objectives, both commercial and non-commercial, as specified in the SOI. QLDC is the controlling shareholder.
So you have the legal power to set objectives covering the nature and scope of QAC’s activities, among other things, and to set performance targets to ensure QAC meets these objectives.(schedule 8, LGA)
Objectives such as regaining social licence for tourism and operating within existing air noise boundaries, for example.
From what I understand, councillors – as a whole – have not discussed and agreed to your strategic objectives for QAC, this or last term.
Without this guidance, you are setting QAC up to fail in its next draft SOI also.
These objectives should be agreed by councillors before the joint QAC – QLDC steering group starts its work in earnest.
QAC is meant to be a council-controlled trading organisation. QAC directors and CEO should not even be involved in this discussion.
The need for a majority of councillors to agree to what changes are needed to the SOI was clearly outlined in council’s legal advice from Meredith Connell last September.
Under recent changes to the LGA, you can also require QAC to produce a long-term plan, asset management plan and climate change mitigation plan.(section 64a, LGA)
All three would seem fundamental strategic business planning documents for an airport company.