Study says 3 million passengers a year needed for $400 million Wanaka airport

by Peter Newport - Sep 09, 2019

A detailed business study produced for lobby group Protect Wanaka predicts that a new airport will need one flight every 10 minutes to justify the forecast $400 million cost. That's 3.14 million passengers each year.

Written by Wanaka resident Richard Somerville, an investment banking specialist who is a former Chairman of Milford Asset Management and former Chief Executive of Hambros investment bank in Australia, the nine page study takes a forensic look at the return on investment needed to justify a $400 million spend by the 75% QLDC owned Queenstown Airport Corporation. The other 25% of QAC is owned by Auckland International Airport.

The study has been published this afternoon by Protect Wanaka.

The numbers produced, as a comparison with other New Zealand airports, suggest that to give a return on the stated $400 million Wanaka airport expansion cost would require:

26,200 flights per year
504 flights per week
72 flights per day
1 flights every 10 minutes (12 hour day)
1 flight every 13 minutes (16 hour day)

The way that these numbers are calculated uses the capital investment at other NZ airports as well as Sydney airport - then compares that investment against passenger numbers. This produces a average capital expenditure per passenger of $127.13. Mr Somerville then simply worked out what passenger numbers would be required to produce a return on investment for the $400 million stated cost for an expanded Wanaka airport.

The result would make a new Wanaka airport bigger and busier than the current Queenstown airport.

Study author Richard Somerville - "It's all very secret squirrel."

In an interview with Crux, Mr Somerville said that he thought the Queenstown Airport Corporation and 75% owners QLDC would have no trouble raising $400 million - even in addition to the extra $100 million or more needed to buy Lot 6 from land owner Alastair Porter for more space in Queenstown. "They are a rating authority and can pretty much borrow whatever they want. In financial terms it would be seen as a solid deal."

Mr Somerville also suggested that the Queenstown Airport Corporation could decide to make a "strategic loss" for a number of years in order to support the local tourism sector. This move would suspend the dividends that currently make a contribution to lowering rates in the district.

"As a major shareholder they can take a longer strategic view and say we need to make this investment for the benefit of the wider community and the tourism industry and maybe in the early years years, we have to take some pain and make an operating loss. It often makes sense to take a hit from some costs up front in favour of a long term view. That's what I would do if I was QAC or QLDC. But the problem is we just don't have any facts from them. It's very frustrating. Its very secret squirrel."

Read Richard Somerville's full report here.

Previously the Queenstown Airport Corporation has been reluctant to share any significant details about the Wanaka airport project and have had their recent Statement of Intent rejected twice by QLDC councillors on the basis that it did not reflect community concerns about noise and congestion.

Mayor Jim Boult - "fundamental flaw in study."

Crux shared Mr Somerville's report with Mayor Jim Boult late this afternoon. Mr Boult was not able to read the entire report as he was between meetings but he made the following initial comment.

"Just reading the first part of this report tells me there is a fundamental mistake in this. The $400 million spend is not all on the airport itself. The cost of creating a regional (but jet capable – if that is what is built) airport is less than half this amount. The remainder is what is forecast to be spent over a 20 year period, primarily on aero related commercial and general aviation activities all of which are revenue generating. This spend will of course be success related as well – if it’s not justified, the plan can be modified."

The Queenstown Lakes District Council released details this afternoon of the further studies it plans to make in order to find community agreement on plans for airport expansion in both Queenstown and Wanaka.

Here's their statement.

"Queenstown Lakes District Council (QLDC) has today published a Request for Proposals (RFP) to undertake Economic and Social Impact Assessments relating to possible airport development scenarios.

QLDC Chief Executive Mike Theelen advised that as the majority stakeholder in Queenstown Airport Corporation the Council is keen to ensure that its strategic direction to the Board is well informed.

“Queenstown Lakes is well recognised as Aotearoa New Zealand’s premier visitor destination and Queenstown Airport is a key regional gateway. It’s an important connection point, not just for visitors, but for local and national business with wide-reaching significance for the district’s economy. It’s also a community asset enabling connections with friends, family and whānau far and wide,” said Mr Theelen.

The RFP requests recommended approaches for undertaking an assessment of the social and economic effects of a number of possible futures for the airport. These include growth in Wānaka Airport and / or Queenstown Airport, constraining growth at both or either location, and increased collaboration with other regional airports.

QLDC CEO Mike Theelen - wants a broad range of community feeddback on airport expansion.

Mr Theelen acknowledged there will be some who will now scrutinise the RFP to find fault or predetermination. The RFP was deliberately neutral and simple in its approach to enable the experts to shape the right proposal. “Frankly the voice we now want to hear is from independent professionals in this space as to how best we should approach this work.”

“In addition to the economic value propositions for the district, Council is also aware of the growing effect of airport traffic on social licence, particularly through recent heightened debate based on incomplete and inaccurate information. So we need to understand and measure the social impacts, both positive and negative, of possible changes linked to the two airports to inform decision-making and the community debate.”

“Some concern has been voiced around the noise created by increased flight movements, the effects on the roading network by capping or reducing flights, and the reintroduction of regular commercial flights in Wānaka. We’re also aware there are many different perspectives on possible development which is why the Council wants to ensure that any community engagement is well-informed, balanced, and captures a wide range of community views and opinions” added Mr Theelen.

The outputs from the assessments will be used as a foundation for informing the Queenstown Airport Corporation 2020-2022 Statement of Intent that will be drafted for March 2020. The RFP will be published via the Government GETS system today (6.00pm) and proposals must be received by interested parties before 5.00pm on Friday, 4 October."