Former Christchurch Airport CEO Malcolm Johns. Photo / Supplied
Former Christchurch Airport boss Malcolm Johns says resilience comes from being prepared for low-probability disasters, and also having a plan to cope with the next crisis, knowing that could hit at the same time.
And he has advice on how the country can rebuild following this summer’s devastating storms.
Johns was chief executive at the airport for nine years, starting when the city, and the company, were in the early stage of recovery from the 2010-11 earthquakes.
For much of Johns’ tenure, the city and wider region faced a series of new crises: the Kaikoura earthquake, the Port Hills fires, two 1-in-100-year floods, then the March 2019 terror attack and finally Covid-19, which paralysed aviation from early 2020.
“There’s no question that you became a specialist in existential events, and there’s a couple of lessons that are really critical out of that. First is that low-probability events are not zero-probability. And the second is that you need to be aware of your big future risks,” says Johns, who becomes Genesis Energy’s chief executive next week.
He started at the airport in 2014, attracted to Christchurch and the company by the opportunity to be involved in the earthquake rebuild and being part of a reimagined city.
“Those opportunities don’t come around too often,” he says.
It turned out to be a “hell of a decade” in Christchurch, but the airport developed a deep understanding of crisis risk and how to prepare for it.
This was in evidence during the pandemic – a cataclysmic event for aviation but one the airport had planned for in an exercise several years earlier.
Johns says when Covid hit there were no redundancies, no call for more capital from shareholders (Christchurch City and the Government) and the business didn’t add debt through that period. It remained profitable throughout.
“That was simply because in 2016-17, we developed a pandemic plan, even though we thought it was a low probability. When Covid arrived, we executed that plan.”
That was very different to reacting to an event when it arrives, he says. One key plank of the pandemic plan was to assess the likely impact on all stakeholders - customers, staff, shareholders and suppliers.
“In essence, we treated our customers, our staff and our shareholders equally through that event,” says Johns.
Between 2015 and 2018 the airport went through a substantial restructuring, adopting a much more contracted-out model.
Suppliers from lawnmowing contractors to runway builders were given a clear mandate that no more than 20 per cent of their turnover should be reliant on the airport.
“We didn’t want them to have too heavy an exposure to aviation. We felt that an event like a pandemic or an Alpine Fault rupture would hurt aviation quite hard and we were looking for resilience in our suppliers,” he says.
The pandemic preparedness – with another major earthquake thrown into the scenario risk plan - was driven by the board, chaired by Catherine Drayton.
“Not only did we look to build resilience into our operating model for these types of events, but we looked for it through our procurement process, the resilience of our suppliers right across the board and we did the same for our customers.”
All that planning was put to the test soon after the pandemic hit in early 2020.
“In that first lockdown in 2020, we were minus 95 per cent [traffic] but we built resilience into our revenue model with property development.”
The airport cut costs as well.
“One of the things we did in 2020, as soon as we went into lockdown, was beginning to prepare for how would the business navigate the Alpine Fault going during Covid, for example. Thankfully, that didn’t happen.”
Johns is a founding signatory and member of the Climate Leaders Coalition steering group, and chair of the APEC Business Advisory Council Climate Leadership for Businesses Task Force. He says the devastating storms this summer prove the need for the country to learn some lessons, and fast.
A rethink was needed on how the Resource Management Act is applied to adaptation for critical infrastructure. Money was better spent on making infrastructure more resilient.
“Do you really want years and years of time and resources applied to getting a consent to change the location of critical infrastructure? We need an accelerated pathway for consenting the adaptation, and new assets that we need to meet the changing climate,” he says.
“I would say that for all businesses in New Zealand, the Canterbury earthquakes were probably the start of the need to understand the difference between being prepared for major events like that versus reacting to it.”
Christchurch International Airport this week reported a net profit after tax of $16.1 million for the six months to December 31, 2022, compared to an effective break-even result ($41,000) for the same period last year.
The latest result was 70 per cent of what was achieved in the last equivalent six-month period before the pandemic.
The company said the transition to a post-pandemic environment with significantly more people travelling through Christchurch Airport had resulted in the stronger-than-forecast first-half result.
Chief executive Justin Watson, who succeeded Johns, said the re-energised city, and people feeling more confident about travelling again, had together contributed to this higher-than-forecast growth.
“We have seen Kiwis return to travel domestically at levels similar to those seen pre-pandemic, and now borders are open again, people are travelling into and out of this airport internationally to reunite with friends and family here and overseas,” he said.
“Our city is back to being a key destination for many sectors. People, businesses and sporting organisations see Christchurch as a great place for their next gathering and tertiary students have declared the city the ‘cool place’ to be.”
The positive result reflected increasing passenger volumes and continued strong commercial performance from other parts of the business, including the property portfolio.
Total passenger numbers for the first six months of the current financial year (2.82 million) were up 88 per cent on the same period last year and at 82 per cent of pre-pandemic levels. Domestic passenger numbers were at 92 per cent of pre-pandemic levels and international at 55 per cent.
International travel will be boosted by the return of Emirates’ Airbus A380s this month, connecting the city to Dubai via Sydney.
The company said its balance sheet remained strong, with borrowing at December 31 continuing to remain at or below pre-pandemic levels. During the period, S&P Global updated the airport company’s credit rating to A-/stable.
The airport is 75 per cent owned by Christchurch City and 25 per cent by the Government. Its board has declared an interim dividend of $14.5m (25.1 cents per share) in line with its dividend payout policy.
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