Painfully slow sell-down of airport stake has cost Auckland Council millions

Auckland Airport is partway through building a new integrated jet terminal. Photo / Michael Craig

Editorial

“Auckland City Council must decide quickly what it wants to do with its 25.8% holding in Auckland International Airport,” the Herald wrote... in 1999.

“Failure to do so could cost it millions.”

A quarter of a century later, Auckland Council has made its final decision. It has sold out of its final 9.71% holding for around $1.31 billion.

The council said the price exceeded its Long Term Plan projection, which was for $7.89 a share after transaction costs.

It should be commended for realising the folly of holding a risky concentration of shares in a single company over which it no longer had any strategic control.

But after numerous partial sell-downs and dilution of its stake, the decision hasn’t been quick and has almost certainly cost ratepayers millions.

The political debate over whether the council should have ownership of crucial infrastructure assets like airports and ports has stymied opportunities to maximise the value of the stake Auckland City once owned.

And there has been an opportunity cost to having the capital tied up in a single asset, one that has finally been addressed with the creation of the Auckland Future Fund – a council-controlled investment organisation.

Auckland Airport began life in 1928 when land rented from McRae Peacock’s dairy farm at Māngere was turned into the Auckland Aero Club.

Auckland City Council played a big part in establishing the site as Auckland’s official airport.

In 1946, the council shifted the official airport to Whenuapai, and it was not until 1965, after five years of construction at a cost of $20 million, that the Māngere site regained its official status and the first commercial jet services flew into Auckland International Airport.

In 1998, the National government of the time sold its 51.6% share in Auckland International Airport in a public float at $1.80 a share. The shares were snaffled up by 67,000 people, mostly New Zealand mums and dads.

Local councils were issued with the remaining 49.4%, of which Auckland City got the largest stake with 25.75%, followed by Manukau with 9.64%, the North Shore 7.14%, Waitākere 3.7% and Franklin 1.17%.

The councils opted not to sell into big international takeover offers that were in play in 1999 and again in 2007. But it did sell down below 20% in 2002 (offloading 12.8% for $190.8m).

With the amalgamation of various holdings in the Super City merger, ratepayers regained a premium stake above 20%.

It relinquished that strategic stake by default. In April 2020 at the peak of Covid panic, Auckland International Airport was forced to recapitalise and undertook a share issue – raising $1.2b.

However, Auckland Council did not participate, up against debt limits and unable to raise the funds, so its holding was diluted from 20% to about 18%.

It partially sold down that stake in 2023 and has finished the job this week.

Those who believe the public should own airports for strategic reasons lost that debate years ago.

And we can only wonder what value has been lost by failing to get on with the job.