Wellington City Council warned airport could request money for expansion plan

• Wellington City Council has stopped the sale of its 34% airport share.
• The long-term plan will have to be amended, potentially involving significant cuts to capital spending.
• The Prime Minister says the Government is concerned and would not hesitate to intervene.

Wellington City Council has been warned that, as a shareholder, it could be called on to provide hundreds of millions of dollars for the airport’s expansion plans.

Wellington Airport’s 2040 masterplan includes $1 billion of capital investment for terminal expansion, runway and taxiway system improvements, new freight facilities, additional aircraft parking stands and a modern fire station.

Last week the council voted to stop the controversial sale of its 34% share in the airport. Infratil owns the remaining 66%.

Council documents from Thursday’s tense council meeting reminded councillors of one of the ongoing risks of retaining the shareholding.

“Retaining the shareholding would also mean that the council could be called on to provide funding for the airport’s growth plans, during a period where its own financial position continues to be constrained,” council documents said.

“If the council does not provide funding when called on, its shareholding will likely be diluted and its influence (to the extent it currently has any) will diminish.”

That’s because the airport could choose to go to the market to raise capital.

A similar situation happened when Auckland Airport launched a $1.2b equity raising from shareholders in 2020 amid Covid-19. Auckland Council did not participate and its shareholding was diluted.

Wellington Mayor Tory Whanau supported the airport shares sale but says she accepts democracy has spoken. Photo / Mark Mitchell

Wellington City Council officials said Wellington Airport could fund its 2040 masterplan by debt or shareholder contributions.

“If no debt financing was available, the council’s contribution could be up to $340 million; if half the programme was debt funded, the council’s contribution could be up to $170m.”

Infratil said it had no comment to make at this stage.

Wellington Airport external relations manager Phil Rennie said the masterplan developments would happen gradually over time and as needed.

The airport’s funding came from a mix of sources and infrastructure investment had historically been from operational cash flow and debt capital funding, Rennie said.

“For the aeronautical business, revenue is sourced via airline charges which are set in five-year periods after careful consultation with our airlines and review by the Commerce Commission”, Rennie said.

“We have close to $500m of investment we’ve consulted on for aeronautical purposes, alongside other planned commercial investments.”

Rennie confirmed most of that was for masterplan projects.

“The aim of our masterplan is to meet the needs of travellers as demand grows over time and make the most of the relatively small space we operate on. It will also ensure our airport infrastructure is more resilient to a changing climate.”

It’s expected 12 million passengers will fly in and out of the Wellington region every year by about 2040.

The council’s decision to stop the sale of its shares in the airport also means its long-term plan will have to be amended.

Up to $600m could be cut in capital spending to create additional debt headroom to respond to insurance risks the sale was designed to mitigate.

The situation has prompted Local Government Minister Simeon Brown to ask for advice on potential Government intervention at Wellington City Council.

Wellington Mayor Tory Whanau said she was focused on delivering the long-term plan and giving Wellingtonians the certainty they deserve.

“I am meeting with councillors this week to work out exactly how we get there, and how we work cohesively together to deliver a Long-term Plan that does not compromise on our must-haves, that being housing, water and climate resilience, while also creating financial prudence for ratepayers.”

Georgina Campbell is a Wellington-based reporter who has a particular interest in local government, transport, and seismic issues. She joined the Herald in 2019 after working as a broadcast journalist.