Queenstown Airport Corporation’s statement of intent has been rebuffed again.
At the “extraordinary” Council meeting planned for this coming Monday, QLDC plans to “agree to” the Statement of Intent from Queenstown Airport Corporation. John Hilhorst wrote a letter to the Mayor and Councillors on Friday. Read it here.
The Mayor and all Councillors
Queenstown Lakes District Council
(By email, individually)
Friday 23rd August 2019
Dear Mayor Boult and QLDC Councillors
In Monday’s council meeting you will be asked to “agree to” a modified version of QAC’s statement of intent. If you were not prepared to agree to the SOI delivered to your June meeting, then you will find no solace in this new version where the additions and modifications have doubled down on presumptive growth.
- For the SOI, the annotations identify what has changed in the document. You’ll see that all the modifications through pages 2-6 focus on strengthening the argument for expansion and growth. These have also included a less than subtle emphasis given to a perceived “local” demand for airport growth.
While the changes on page seven acknowledge the proposed economic and social impact assessments, they offer no indication of any change in the presumption of airport expansion or of any prospect that QAC might be open to potential strategies other than continued expansion and dual-airport.
Wanaka people will note the explicit removal of stakeholder and community consultation regarding the Wanaka Airport planning for the next two years, despite this work continuing (p.9).
On balance, the modified SOI presents a stronger vision for expansion and continued growth at both Queenstown and Wanaka airports than the previous version, notwithstanding the ‘virtual’ pause it appears to concede.
- For the council motion, the annotations identify several errors in legal process and challenge the advice provided to councillors.
This analysis highlights the high level of exposure council has to a judicial review or an audit by the Auditor General.
Please review the two documents attached and the analysis below.
I ask that you:
- vote to NOT AGREE TO the SOI, and
- vote to modify the SOI using the process of clause 5 of Schedule 8.
(The draft motion outlined in Point 17 below gives an example of how this could be done)
Report for Agenda Item 1
It is deeply concerning that the information offered in this formal advice to councillors contains significant errors and misrepresentations of the legal process and council’s responsibilities.
This seeks to falsely perpetuate the myth that council was obliged to “receive” the June SOI “to ensure that QAC could meet its obligation under the Act”.
There was no such statutory obligation, as conceded by council’s legal manager Alice Balme in her email of 10 July. The requirement was on QAC to deliver its SOI to shareholders by 30 June, and it had done so. “Delivery” is proven at law by evidence of delivery – by email, courier, post or hand delivery, and that the SOI was available in Council’s agenda was ample proof of delivery.
We have written to the mayor, councillors, Mike Theelen and Alice Balme (council’s legal manager) on this matter. You’ll see this was published to the page “It’s council’s call” (Just over halfway down the page under the heading “Query to Mayor Jim Boult on need for motion”. You’ll also see it in the email thread of legal points we covered with the mayor and councilors following the meeting of 27 June. It is also included in the SOI – fact sheet sent to councillors and published online. This was was also in the statement I presented at Public Forum in the meeting of 8 August. There is no excuse for this falsehood to be repeated in this current advice to councillors.
This seriously misrepresents the legal process required from the LGA. Section 65(2) of the Act sets out the annual process for council once the SOI has been delivered to it. The law is unambiguous. Council must either “agree to” the SOI, or use clause 5 of Schedule 8 to require it to be modified. It is one or the other – there is no third option. Council must do this “as soon as practicable” and “take all practicable steps”.
This is a specific and required annual process following the 30 June delivery of the SOI, not an ongoing, anytime process as suggested in an email we received from Alice Balme, council’s legal manager, and implied in this advice to councillors. While it is true that both QAC and council could modify the SOI at any time of year (under clauses 4 and 5 of Schedule 8 respectively) and that Section 65(1) refers to regular and ongoing monitoring of the SOI by council, section 65(2) is explicitly concerned with the annual delivery by 30 June of the SOI to council.
The legal process of section 65(2) is in direct contrast with the advice in Point 7, which suggests that if Council doesn’t agree to it, then it is for the board of QAC to modify the SOI. The effect of this advice is to have councillors pass the onus for changes to the SOI back to QAC. With QAC in control and using the mechanism of clause 4 in Schedule 8 then Council would only get an opportunity to “comment” on QAC modifications and QAC only needs to “consider” these comments. This has QAC in the driving seat and leaves councillors impotent.
In contrast, the proper legal process of section 65(2)(b) unequivocally puts the control with Council (not with QAC), and explicitly gives Council a directive control where it can “require” specific modifications to the SOI.
It must be frustrating to councillors that their mayor and executive advisors have so substantially and incorrectly disempowered them on this issue – one so important to their constituents.
It’s council’s legal responsibility, if it doesn’t “agree to” the new SOI, to now use clause 5 as the mechanism to modify it.
We have brought this to the attention of council, the mayor and councillors on multiple occasions, as shown in the links provided above to the legal emails, SOI – fact sheet and presentations at public forum.
This outlines the incorrect legal process that was followed by council after its 27 June meeting, and the advice in 17(a) would again direct council into this same process that would not comply with the law of section 65(2)(b).
This incorrect process has effectively neutered councillors by leading them into workshops that are opaque to public scrutiny, provide no written minutes, no clarity on any collective council position, and no legally traceable or enforceable direction or guidance for QAC.
The result, whether by design or default, is that 12 months after the QAC ANB consultation (with its 92.5% rejection by the community), and six months after receiving the draft SOI, and a further two months since the SOI was delivered to council; there is still no council resolution that provides its strategic objectives, as required to be included in the SOI for QAC.
Our understanding is that the specific content of Mayor Boult’s speech prior to the August 8 council meeting had not been agreed to by councillors. While we understand he did send a copy of the speech to councillors the day prior to delivering it, there appears to have been no invitation for input or feedback, nor request to confirm their agreement. So the mayor’s claim that it was “on behalf of my fellow councillors” should be questioned.
As the speech was not a resolution of council, nor from any subcommittee of council, it’s legal standing in the SOI process is questionable.
The suggestion here that the work on the proposed economic and social impact assessments could “be completed prior to year’s end” gives scant hope that these will be rigorous and objective evaluations of the costs and benefits of alternative strategies.
Indications to date suggest the focus of the economic assessment will be primarily to establish the importance of the economic contribution of the airport with the purpose of reinforcing the argument for its expansion and growth.
What will councillors do to ensure that it becomes more than this, so as to provide a useful resource to help understand the many issues and concerns raised by the community?
This advice compounds the problem outlined above and again misrepresents to the councillors the law for section 65(2). If council does not agree to the SOI, then this Option 2 would again leave it impotent in the hands of QAC and ongoing “discussions”. The law directs council, if it can’t “agree to” the SOI, to use clause 5 of Schedule 8 to require the SOI to be modified. The law does not provide the option to “continue further dialogue”.
To be effective, Option 2 should set out a draft motion that could properly put clause 5 into effect. An example might be:
- To establish a subcommittee, under the facilitation of an independent chair, tasked with preparing this resolution for the next scheduled council meeting. This subcommittee will consider matters as identified under clause 9(1)(a) to(i) of schedule 8.
- This subcommittee is given the authority to liaise directly with Council’s legal advisor and consult directly with the board of Queenstown Airport Corporation.
- The subcommittee will report back to the next meeting of Council with a draft resolution that satisfies the requirements of clause 5(1) of schedule 8 of the LGA, with the modifications required of the statement of intent, including provisions to be omitted or included that would ensure the statement of intent gives effect to Council’s key strategic objectives.
- In its process, the subcommittee will provide its draft resolution to the board of Queenstown Airport Corporation to facilitate consultation.
- Council hereby gives notice to Auckland International Airport of its key strategic objectives that are to be met by modifications to the Queenstown Airport Corporation’s statement of intent.
The absence of a resolution planning how to effectively activate clause 5 is a serious shortcoming of this Agenda Report.
In the context of this vote, we note the public references to the mayor Jim Boult’s potential conflict of interests in this negotiation of council with QAC. Mr Boult resigned from Real Journeys on an unspecified date in November 2018, and became a director of Wayfare Group on the day it was incorporated on 2 November. He was chair of Real Journeys and he is now chair of Wayfare Group. Wayfare is the parent company of Real Journeys, Go Orange, Cardrona Alpine Resort (bidding to buy Treble Cone), Canyon Brewery and the International Antarctic Centre. It is the biggest tourism company in the Queenstown Lakes, operating on both sides of the hill. I understand that that the only area it does not operate in is visitor accommodation.
There is ample room for perception of a possible conflict in so far that the interests of these companies with regard to the expansion plans of the airport may not be aligned with the clearly expressed interests of the ratepayer community (92.5% rejection). As such, it would be wise for the mayor to stand aside from selection for a subcommittee formed per the draft resolution above.
This is surprising advice, given that the modification done by QAC to the SOI has introduced new text and language to effectively double down on continued growth. The changes seek to amplify the perceived need for airport expansion and growth including expansion of ANBs. Given that this was the issue causing most councillors to speak against it at the meeting of 27 June, where a majority of councillors were not prepared to “agree to” the delivered SOI, the advice seems to conflict with the clearly expressed views of a majority of councillors.
Of course it would have financial and operational consequences, but this advice seeks the inference that these consequences would be negative, when the likely outcome is very positive. A reduction on airport expansion that chases low cost, low value “demand lead growth” could dramatically increase QAC’s profits and its dividend payments to council.
If the ANB limit were to be enforced, the most likely tool by QAC to manage demand would be to raise the landing fees.
With landing fees comprising 72% of its income, this would substantially increase QAC revenue. At the same time, the capex would reduce to maintenance levels. These two effects would cause a massive increase in QAC profits. This is in stark contrast to the currently proposed expansion plans that promote debt funded investment of half a billion dollars, the servicing costs of which would more than hobble QAC’s $24 million before-tax profit.
Managing flights to within the ANB would also mitigate the excessive growth rates experienced in our district, reducing the financial and other growth stresses on our local infrastructure and ratepayers to more manageable levels.
It could also change our visitor profile from budget conscious short stay visitor to higher value visitors who stay longer. This would increase the value gain per visitor, making for a more sustainable economy with the district changing from a fast food version of tourism and the district’s business moving up the value chain, with better profits and wages for locals.
The process to date has not been consistent with the Act, as covered above.
This advice carries an imperative for growth, which is not the case for this airport. Neither council nor QAC are required to create budget priced bulk air access direct to Central Queenstown or Wanaka, making them the fast food centres for tourism.
This is not a choice between growth versus a static future, as falsely characterised by the mayor in his statement of 8 August. More realistically, it’s a choice between:
- Continuing uncontrolled growth focused on low-value, high-volume tourism that undermines environmental values, exhausts social licence, overwhelms infrastructure and entrenches a low wage economy, or instead
- A change of direction to a more selective, higher-value, better-paid, more sustainable tourism economy that could deliver a much better quality experience for visitors and better livelihood and lifestyle for the local community.
While writing this today, I received an emailed offer like many before. It was for an all inclusive trip to Queenstown – including return flights ex Auckland, two nights five star accommodation with cooked breakfast and two full day lift passes to Coronet and Remarkables – all for the budget price of $499. With the ticket price for this being $1,800, it’s easy to understand why the district is bursting at the seams, and also why the majority of wages are at or near the minimum wage.
As a destination, Queenstown and Wanaka share many characteristics with Milford. It is right and proper that the airport in Milford is restricted for number of flights, as are the boat movements on the fjord, and soon the vehicle access through the tunnel. Just as the demand and access to Milford can and should be managed to protect both the environment and visitor experience, so to should QLDC and QAC manage demand into Queenstown. Similar cap controls have been applied to Schiphol airport to manage tourism in Amsterdam and cruise ships near Venice.
Contrary to the mayor’s assertions, proper management of the airport infrastructure to support sustainable social and economic life in our district does not require the constant and inevitable growth of airport capacity. Just as councils manage the transport in our cities, choosing between car-centric urban sprawl or intensive development supported by public transport systems, we can choose the character of this district we call home.
Council is responsible for the protection of our outstanding environment and a healthy sustainable community. Limiting the airport to operate within the ANB is a completely viable option to achieve this purpose, and fits within council’s legal responsibility, being “to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future”. [s.10(1) of LGA]
QAC would retain a range of options with such limits in place that enable it to operate effectively, including simply enjoying the increase in profitability, or even moving to a location that could absorb more flights with less impact on its environment. In any of these it could continue to successfully “conduct its affairs in accordance with sound business practice” [s.59(1)(d) of LGA] and “be operated or managed as a commercial undertaking” [s.4(3) of AAA 1966], as it is required to do by law.
Additionally, the airports of Christchurch, Dunedin and Invercargill could take further flights, with better potential economic and social outcomes for the region than focusing all airport expansion into Central Queenstown or Wanaka.
Such controls on airport growth would likely support the local economy’s movement up the value chain as has been long espoused by many in the tourism industry. Greater return per visitor would provide a more sustainable economy, better living environment and better mitigation for climate change.
Cc all councillors, Council CEO, WSG, Office of the Auditor General and media
There is no time to lose. Queenstown airport is within 3 years (depending on tourism slowdown) of reaching its noise boundaries. The Queenstown community has unequivocally said NO to any expansion of those boundaries. Wanaka appears similarly opposed to expansion at its airport.
Yet, a third version of the Queenstown Airport Corporation (QAC) Statement of Intent (SOI) which Queenstown Lakes District Council will consider tomorrow (Monday, August 26), attempts to ‘push pause’ on its development plans while further reports and plans are considered.
The airport has known since last August that it has no community support for noise boundary extension in Queenstown, (Wanaka views are not as well surveyed yet – more on that below). Yet in the year that has passed, the airport has failed to come up with any alternative strategic direction to its two airport growth strategy….
ANALYSIS: It’s been almost a year since the Queenstown community sent a very clear message to the Queenstown Airport Corporation (QAC). The vast majority do not support further airport expansion.
When the QAC then turned its sights on Wanaka the response was the same – except louder, bigger and even better organised.
So let’s be clear here. The combined communities of Queenstown and Wanaka have spoken clearly. They’ve said a great big “No” to more airport expansion – at least until there is genuine consultation, better infrastructure funding and an authentic, truthful statement about where we are all heading in terms of climate change, sustainability and tourism being carefully curated as a quality, socially licensed element of our local economy… Read the detailed analysis on Crux here.
Queenstown. Beautiful place. But becoming a bit of a bugger of a place, they say.
Anyone flying in can’t help but gawp and gush at the scenery, The Remarkables up to their left as they cross the tarmac, Lake Wakatipu’s willow-fringed shore just down the hill.
But then you drive out of the airport and hit that first tailback before the roundabout by the BP, and the traffic carries on all the way into town…
Who should decide how many more tourists fly into Queenstown and Wanaka? Journalist and former district councillor, Cath Gilmour, argues that local residents and not the airlines should have the final say.
Opinion: Queenstown Lakes Mayor Jim Boult has made it very clear that he believes Queenstown Airport must remain in its current location, despite vociferous opposition to its planned expansion… Read this in full on the Newsroom website here.
In September, QAC sent a company profile and FAQ to council candidates. Among other things, this outlined how its role is defined by various pieces of legislation. It seems, at times, that the legislative responsibilities under which QAC must operate are used to nudge control of it beyond the influence of councillors.
This paper reviews the legislation to help councillors understand the role of QAC and the scope of their control over it.
The law shows councillors have huge and directive control over QAC. It shows that:
- QAC doesn’t need to grow for business or profit reasons.
- It also doesn’t need to grow for infrastructure reasons (that’s up to council’s view on how to best support our community’s current and future wellbeing).
- Council can set any objectives for QAC that fit with increasing the wellbeing of our community.
- It is totally council’s control and job to set the objectives and the nature and scope of QAC’s business (and all other strategic decisions).
- The Statement of Intent (SOI) is totally the big deal as the way for council to control, direct and evaluate QAC.
- Council has absolute right to direct the board of QAC to modify the SOI to make sure it fits with council’s objectives.
- The QAC constitution and council’s 75% shareholding gives council absolute and total control to pass binding shareholder resolutions at any time, even without notice or consultation with QAC or the other shareholder (AIA).
- QAC has control over landing fees and can increase these.
- While Queenstown Airport is currently designated as a Lifeline Utility under the Civil Defence Emergencies Act, the Governor General could easily transfer this to an alternative such as Ladies Mile if required.
If you are interested to learn more, grab a coffee, pull up a comfy chair and join me in the long grass of detail.
Must QAC be profit driven?
Some people falsely argue that QAC is required by law to operate as a successful business and to be as profitable and efficient as comparable businesses in the private sector. That councillors cannot, therefore, control or limit QAC from making its own commercial decisions about its growth and expansion plans.
This is wrong.
It is true that the law requires QAC to:
- “conduct its affairs in accordance with sound business practice” [s.59(1)(d) of LGA] and also to
- “be operated or managed as a commercial undertaking” [s.4(3) of AAA 1966],
But the words “operation”, “management” and “sound business practice” refer to how it operates, not to what it does.
This legislation was introduced to move away from previous experience where councils may have subsidized organizations or commercial activities that they controlled. CCOs must now, for example, properly account for the assets they have, deal with depreciation and finance costs and so forth. CCTOs must generate revenue and apportion costs in the manner of a normal business. They cannot cross-subsidize within the business, they need to cover the investment costs of capital and their profit return should be commensurate with the size of investment.
Note: CCTOs are a subset of CCOs, and the legislation applies equally to both.
These laws require QAC to operate with sound business practice, but they do not relate to the strategic vision or purpose of QAC.
The law gives council (as controlling shareholder) complete control over the objectives and the nature and scope of activities of QAC. These objectives can be either commercial or non-commercial [s.59(1)(a) of LGA]. And the legal mechanism of control is the Statement of Intent.
To understand how strongly the legislation empowers council to set non-commercial objectives, it is worth contrasting the relevant section with that outlining the principal objective for SOEs in the State Owned Enterprises Act 1986 (The CCO legislation in the LGA was modelled on the SOEA).
Both SOEs and CCTOs are required to be good employers and exhibit a sense of social responsibility. But, whereas the SOE legislation requires them to be as successful and profitable as a private business, the LGA requires CCTOs to achieve the objectives of its shareholders as specified in the SOI. And those objectives can be commercial and/or non-commercial.
For a State Owned Enterprise: The principal objective of every State enterprise shall be to operate as a successful business and, to this end, to be as profitable and efficient as comparable businesses that are not owned by the Crown [Section 4(1)(a) of SOEA 1986]
For a Council Controlled Organisation: The principal objective of a council-controlled organisation is to achieve the objectives of its shareholders, both commercial and non-commercial, as specified in the statement of intent. [Section 59 (1)(a) of LGA 2002]
This highlights the absolute importance of the SOI as the controlling document that sets the purpose and strategic objectives of the CCTO. What is written into the SOI is what QAC is compelled to do.
This is made further explicit in section 60 of the LGA which states that decisions relating to the operation of CCOs must be made in accordance with its SOI and its constitution.
In the case of QAC, its constitution is just a set of rules, much like the standing orders that govern council meetings. The constitution offers no insights or guidance into the purpose or objectives of QAC, so the SOI is the single key document for this.
It has been strongly asserted that the SOI is QAC’s document and that council should have a hands off approach. This view is not borne out in the legislation.
Yes, the annual job of drafting the SOI and presenting a final version to shareholders (council and AIA) sits with QAC. But the law provides the ability for both QAC and council (as controlling shareholder) to change the SOI at any time (clauses 4 and 5 respectively of Schedule 8, LGA).
More significantly, the law gives council (as controlling shareholder) the directive control over nine of the 11 elements that must by law be in the SOI. This gives council the right (in clause 5) to require QAC to add or strike out any provisions in the SOI that relate to those nine elements. And the Board of QAC must comply.
Clause 5 is a straight editing job where council (as controlling shareholder) could rewrite the SOI to how it wants. While it does require council to consult with QAC regarding the matters concerned (and case law sets standards for this), the law requires that QAC must comply. That makes pretty clear who’s boss.
Those nine elements that are controlled by council (as controlling shareholder) are listed as (a) to (i) of clause 9(1) in Schedule 8. In summary, these have to do with:
- The objectives, nature and scope of activities and board governance [(a),(b), and (c)].
- Some financial information and controls, including dividend distributions [(d),(e),(g), and (h)].
- Performance targets and how these are measured [(f)].
- Process regarding how QAC might acquire other companies [(i)]
The only two elements required to be in the SOI that council cannot directively control (as controlling shareholder) are:
- Related to the services that council might buy from QAC, [(j)] and
- The board’s estimate of QACs enterprise value, and how they estimated this [(k)].
This shows the law is very clear that council (as controlling shareholder) has complete control over the objectives, nature and scope of activities, and all the strategic levers governing QAC.
It makes sense that, in practice, the best way to manage QAC is for council to have an open and respectful relationship with the board and executive of QAC, and to use consultation and discussion to guide strategic planning. But this doesn’t change or diminish the fact that council is the boss as it owns the controlling share of the company. If council wants a change in strategic direction, then it is entirely its call to make.
The Office of the Auditor General (OAG) has published several excellent reports on how councils should govern CCOs.
- Governance and accountability of council-controlled organisations (2015) This is essential reading. It has been used by advisers to councillors to emphasise positive relationships as the key to managing QAC. That’s obviously true, it makes sense to have the board and executive of QAC working positively. But this advice misses the importance the OAG gives the SOI (7.12 to 7.22). The auditor also questions the reluctance of councils to use clause 5. The example given of when in 2010 QAC sold 24.99% of the company to AIA without councillors’ knowledge is sobering.
- Statements of intent: Examples of reporting practice (2009). The OAG reviewed 125 SOIs and found none that met a “best practice” standard, or even any specific section of any of them that could model an aspect of best practice. Instead, this report discusses examples of some sections that were “better” practice to help illustrate how they could be improved.
QAC’s statement of intent illustrates many of the OAG’s concerns of poor performance reporting. Two examples being:
- It’s not made clear how the objectives of QAC are based on those council has for it.
- There is no effective performance monitoring. The four pages titled “Priorities and Performance Metrics” would be better called a task list. It includes almost no measures of performance and certainly no evaluation.
A worthwhile goal for council this year would be to have QAC deliver an SOI that would meet the OAG’s standard for best practice.
The starting question is: Does council know what it wants from QAC?
The air noise boundary consultation brought to a head community concern regarding airport growth. But at no time since has council, as governance entity, clarified any change in its objectives for QAC (ie by resolution). Yet council has twice now refused to agree to the SOI submitted by QAC. In this process the cart is leading the horse!
As key infrastructure, is QAC compelled to expand?
The mayor’s assertion in his statement on 28 August that both council and QAC are legally compelled to facilitate the airport’s inevitable growth is false.
A comparable example would be if the mayor of Auckland and NZTA were to claim that the law compels them to build more motorways. That’s not what the law says.
The law states that the purpose of council is “to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future”. [s.10(1) of LGA]
It further requires council to “ensure prudent stewardship and the efficient and effective use of its resources in the interests of its district or region, including by planning effectively for the future management of its assets”. [s.14(1)(g) of LGA]
It requires council to take “a sustainable development approach taking into account; the social, economic, and cultural well-being of people and communities; and the need to maintain and enhance the quality of the environment; and the reasonably foreseeable needs of future generations”. [s.14(1)(h) of LGA]
The law does not prescribe that the airport must grow, but rather allows council to determine how the airport should be developed to meet the well-being of its community.
In the face of global warming, over-tourism impacting hotspots throughout the world and a local community stressed by rapid growth to name but a few issues facing our community, it’s council’s job to balance these complex issues and find the best way to achieve our community well-being. And that means for all members of the community, not just businesses under a debunked trickle-down theory.
Creating a mass-transit air service that provides budget-priced, bulk air access direct to Central Queenstown or Wanaka may not be the best way for council to achieve the social, economic, environmental, and cultural well-being of our community.
Just as councils manage the surface transport in our cities, where they can choose between car-centric urban sprawl or intensive development supported by public transport, we can choose the character of this district we call home.
QAC’s so called demand-led growth for bulk, cheap air services would likely perpetuate low-value, high-volume tourism that undermines environmental values, exhausts social licence, overwhelms infrastructure and entrenches a low wage economy. And do so against strongly expressed community opposition (92.5% of over 1,500 submissions, unanimous opposition of all 7 Wakatipu community associations, and Queenstown Stakeholders’ representing Destination Queenstown, Queenstown Chamber of Commerce and Downtown Queenstown).
Instead, managing the airport to within the current noise boundaries might well develop a more strategic, higher-value, better-paid, more sustainable tourism economy that could deliver a much better quality experience for visitors, and better livelihood and lifestyle for the local community. All achieved without an increase in aircraft emissions.
That mass tourism is overwhelming and destroying high value attractions all over the world is now a commonplace concern. Cap controls have been applied, for example, to Schiphol Airport to manage tourism in Amsterdam, and for cruise ships near Venice.
How mainstream these concerns are, is clearly evident when the state of California announces it is developing a Destination Stewardship Plan.
In their words, they “are re-thinking plans in order to shift from destination marketing to destination management.”
“This decision” they write, “results from a growing understanding of the need to balance a successful visitor economy with other factors such as the quality of life for residents, impacts on the environment and increased demands on infrastructure.”
If this is true for the whole state of California, often identified as the 5th largest economy in the world, then it is doubly so for us here in Queenstown Lakes. We need visionary leaders not locked in old paradigms.
Note: QAC’s “demand-led” growth paradigm is false economics. Market demand is not a standalone notion, it is the outcome of consumer willingness and ability to pay at a given price. Flights to Queenstown are substantially cheaper than equivalent flights to other regional centres such as Dunedin or Invercargill. QAC controls the landing fees, notwithstanding that it must consult with airlines when setting them. Raising the landing fees to mitigate excessive passenger growth rates would add hugely to QAC profitability. Research shows increasing landing fees leads to fewer empty seats, larger capacity aircraft and fewer flights per day.
The mayor and council staff have stated that we have no control over the number of people who choose to visit or live in our district, and that council is forced to develop more infrastructure to meet the demand. This view misses the fact that council has controlling ownership of the airport.
With 30-40% of visitors arriving by air, the airport is the single most effective tool that council could use to manage tourism growth in Queenstown and Wanaka. Currently it is systematically managed to maximise growth, as with last month’s 22% growth in international visitors compared to the same month last year, at a time when we’re told that tourism growth is weakening.
The excessive growth rates of the past ten years that is overwhelming our community can, in large part, be sheeted home to changes made at the airport. Introduction of jet services, alliance with AIA, introduction of international flights and extension of operating hours. Each of these is under the control of council as they relate to the nature and scope of activities.
Like the rest of the world, we need to smarten up and realise that our future success won’t come from just growing the number of bums on seats.
Can QAC increase landing fees?
Yes, QAC can charge landing fees on both a per aircraft and per passenger basis [section 4B of AAA 1966].
The only caveat is that it must consult with every affected “substantial customer” before 3 fixing or altering these charges. These consultations are routine and already occur regularly, as the law also requires QAC to consult on charges within 5 years of fixing or altering them, so this applies to the fees it currently charges.
Note: A substantial customer is defined in the law as one that pays more than 5% of the revenue earned by the airport.
Case law has set standards as to what constitutes “consultation”, particularly that it needs to be in good faith, but the upshot is that the right to set the fees and the amounts set is under the direct control of QAC.
In a scenario where Queenstown Airport capacity is effectively capped by the current noise boundaries and there is no expansion of Wanaka Airport, then the consumer demand for flights would be effectively managed by price increases. If QAC does not increase landing fees then all the price increase would go to the airlines. It makes sense that QAC would increase its fees in order to take an appropriate share.
Contrary to the assertions of some, this scenario presents the single most profitable outcome for QAC, and the largest potential dividend return for council.
It would avoid heavy capital costs and associated debt financing while dramatically increasing revenues. While it would ultimately result in a lesser equity value than might come from growth in numbers, equity offers little use to council or ratepayers unless the plan is to sell the company.
It would also reduce many of the costs – such as transport infrastructure – that are externalised to the community.
Queenstown Airport is required for emergencies
Queenstown Airport is listed as a Lifeline Utility in the Civil Defence Emergencies Act 2002 [Part A, (5) of schedule 1, CDEA], which means it must ensure that it is able to function during and after an emergency [s.60, CDEM]. This, however, has no bearing on whether the airport should expand.
The need for air support in case of civil emergency is also not a barrier to the possible relocation of Queenstown Airport. Alternative strategies can be developed to ensure emergency preparedness. For example, the Ladies’ Mile stretch of road could instead be designated by the Governor General as a Lifeline Utility to provide the same capacity (as explained here).
QAC is a company owned by AIA (24.99%) and council (75.01%). As with any company, the owners determine the objectives and nature and scope of its activities, along with other strategic goals. The rules governing how this works is QAC’s constitution, which operates under the Companies Act 1993.
Shareholder decisions are determined by majority vote, giving council control. More than this, section 13.3 of the constitution outlines that a majority of 75% of shareholders can pass binding resolutions at any time, even without prior notice or a scheduled meeting. The only obligation to other shareholders not present is for QAC to send them a copy of the resolution within 5 working days.
Good practice would be for open communication and consultation with AIA and with QAC. But, with council owning 75.01% of the company, the legal position is that council has unilateral control that it can exercise at any time.
Collated by John Hilhorst – 24 October 2019