Public ownership of Auckland Airport could soon vanish from the radar.
As the city waits on a new annual budget that is likely to use a variety of levers to make up for what was announced yesterday to be a $375 million budget gap for Auckland Council, major asset sales are being floated by both the Mayor and council staff as a way to keep level during fiscal turbulence.
But while selling the council’s 18 percent of shares in Auckland Airport may pose a relatively quick way to get on top of some financial woes, union representatives, tax consultants and environmental advocates have come out against the move.
Meanwhile, Brown has taken aim at the council’s role in airport ownership – perhaps unnecessary for a potential future version of council that’s stripped down and financially limber.
The importance of that 18 percent chunk of publicly-owned airport has divided politicians as the final version of the budget is discussed in council.
Climate and health advocacy groups have come out strongly against the sale this week, calling it a “generational mistake”.
Adam Currie is a campaigner for climate action group 350 Aotearoa.
He said without council maintaining a look-in, the likelihood of climate goals being achieved at one of the country’s most important transport junctions is up in the air.
“Airports shouldn’t just be about profit,” he said. “We’ve seen a clear difference with publicly-owned airports where councils set clear statements of intent – when there’s public ownership it makes a big difference.”
He pointed to publicly-owned airports around the world having a better track record when it comes to lowering emissions.
The Welsh government bought Cardiff Airport back from private owners a decade ago in a move that ended the outsourcing of jobs, cut carbon emissions and boosted flights using the airport.
Then there’s the world-first case of Schiphol Airport, where flights were reduced by 11 percent to combat air travel emissions. It was a move authored by the site’s majority stakeholders – the Dutch government.
“The partial privatisation of our public energy infrastructure has shown the long-term harm of privatisation of our crucial assets,” Currie said. “Auckland council must not make the same mistake here.”
Most of New Zealand’s main airports are predominantly publicly-owned, with two-thirds of Wellington Airport and three-quarters of Christchurch Airport owned by their respective councils.
Generation Zero’s Yasmin Kidd said the airport sale was short-term thinking not in alignment with Auckland’s long-term goals.
“Auckland Council should ensure protection of this strategic asset. Auckland Council is a public entity that provides public services, and having shares in Auckland International Airport is critical in serving Auckland communities,” she said.
Nevertheless, Brown has made it clear he doesn’t want to be in the airport game, calling the asset sale “the only sensible course” in an opinion piece for the New Zealand Herald at the end of March.
He pointed to the continued debt servicing the council needed to pay to keep a hold of the shares and low dividends during the Covid years.
“In the past three years, holding those shares has cost the council $240m in interest payments in order to receive a dividend of nothing,” he wrote. “This is just stupid.”
He didn’t address the climate impact of the council having a say as a shareholder. However, some criticisms floated have asked whether Auckland Council has much say anyway – it doesn’t have a seat on the board, just a portion of shares.
Campaigner and legal researcher Max Harris said while the council could and should be doing more when it comes to bringing a public voice to the running of important strategic assets like the airport, selling the shares is going in the wrong direction.
“Even aside from having a director on the board, there are ways that large shareholders can influence companies, including through votes at shareholder meetings,” he said. “There is still potential for public voice to be heard through this significant shareholding, and being a significant owner gives council power that would be recognised by other shareholders and other people.”
Shareholders exercise their own power by voting on company changes or new board members and the ability to ask questions about climate or public transport goals.
Harris argued once public ownership was gone, coercing the proverbial cat back into the bag would be a tall order.
“It would be very difficult to reverse this decision, as we’ve seen with privatisations at the central level,” he said. “The challenge to increase public ownership is politically harder perhaps than selling off the stake.”
He said the stabilising influence of the public interest being represented among shareholders was vital for such an important part of Auckland’s infrastructure.
“There are risks of having an airport being entirely driven by profit motives without any kind of mitigating or stabilising influence on that,” he said. “Having a shareholder who brings public considerations to the table is really important.”
And those considerations seem to be myriad.
There’s the quest to reduce emissions – although airport CEO Carrie Hurihanganui says the company remains committed to reducing its carbon footprint by 90 percent in direct emissions from 2019 levels by 2030.
But there’s also jobs. E tū director for aviation and infrastructure Savage wrote for the New Zealand Herald last week that without partial council ownership, crucial infrastructure is left in the hands of a private company.
Tax consultant Terry Baucher said he’d seen that kind of thing before – namely, the deteriorating roads and water infrastructure of the Auckland region.
“The mismanagement and the selling down of strategic assets has not been overall to the country’s benefit,” he said. “It’s all been done for short-term sugar hits and paying off a little bit of debt.”
He said council documents acknowledge the importance of the airport as a strategic asset for the region.
“But then it says the commercial incentives inherent in private ownership will align with these outcomes. Well, that is just bullshit – that’s what I’ve been hearing for 30 years and I don’t accept that, I don’t think we should accept that because that’s never been the case.”
But the mayor has been clear enough in his own views on holding onto the shares as a financial decision for the council, saying it’s a “lousy investment for debt-burdened ratepayers”, with the current shareholding liable to be further diluted if the group doesn’t inject fresh capital into the airport during future expansions.
Auckland International Airport Limited recently announced a $3.9 billion project to build a new domestic terminal to the east of the current international terminal, eliminating the 500m stroll that’s existed for transfers.
The plan will have ramifications on both future dividends and the amount of capital Auckland Council may be expected to inject into the facility.
According to advice Auckland Council provided to its governing body last week, offloading the shares would save the group just under $100 million per year in avoided debt interest. Share prices from mid-April would see the council net just over $2 billion for its shares.
The council’s own documents forecast a steady rise in dividends, suggesting a greater opportunity cost to selling off the shares if the 2030s and beyond are taken into account.
The council documents only indicate projections to councillors up to the year 2031, cropping a potential return on investment next decade fully from the picture.
At the same time, capital raising initiatives by an expensively self-improving airport could see the council’s portion of ownership diluted over the years.
Council officials offered cons to a partial sale or no sale at all, hinting that this route would require the council to lean on other distasteful budgetary levers such as cutting services or borrowing more.
There’s no one without the other – that’s the message the council seems to want to impress upon the deliberating councillors, with an image of a series of cogs and gears working in concert to power some mystery machine.
“All levers/cogs are interrelated and if one is used less another needs to used more,” the advice reads.
It’s an arresting image – gear teeth coming together in lockstep, unable to move unless their dance partner moves in tandem.
It suggests no future in which the council manages to keep its head above the waterline will be possible if the current crop of councillors neglect any of those strategies – spending cuts, rates increases, debt and asset sales.
But while the council paints a picture of little wriggle room when it comes to airport shares, the consulted public was less decided.
Of almost 33,000 Aucklanders who submitted on the decision, a quarter supported full sale, 28 percent supported partial sale, 34 percent didn’t support any sale and 13 percent chose ‘Other’ or ‘I don’t know’.
The council packaged this as the majority of Aucklanders supporting the sale. However, that’s a statement that brushes over the nuance between ‘full sale’ and ‘partial sale’ – the latter covering a wide range of potential outcomes.
The truth is that roughly equally sized camps went for each of the three options on the table. People are split, and it may come down to just how unappetising further public debt or cuts to services sound to each Aucklander.
The main reasons given for supporting a sale were a view that airport ownership should not be in the job description of local government, and a belief that it doesn’t make sense to hold shares while continuing to borrow money at higher interest rates.
Those in the hold-the-shares camp had concerns about selling those shares in the middle of a downturn in the market, and said it was better to keep infrastructure assets and find other revenue streams and cost savings.
Councillor Mike Lee said the council documents pushing for the sale showed how the budget process from the beginning had been designed by “the very people responsible for this situation”.
“In regards to ‘gears and cogs’ assumptions, one gear and cog has been locked in place which is record capital expenditure of $2.8b, routinely misnamed ‘investment’, in a record budget of $6.4b,” he said. “Also locked in place, behind a locked panel, is the operational expenditure for the council admin itself.”
“The push to sell airport shares (a genuine incoming earning investment but ironically never called that) has been constant and intense in all budget related briefings. To me this is deeply troubling.”