The Financial Case for Relocation is Compelling

A ridiculous notion - relocating the airport would cost way too much! Figures ranging from one to two billion dollars were shot from the hip by people who should know. We had the same knee-jerk negative reaction. And then we looked deeper.


We found that a new greenfield airport could likely be wholly funded by the sale of Frankton land, providing $1.2 billion for QAC, in stark contrast to the debt funded investment needed for its dual airport strategy.


As well as being a better upfront capital investment, a single new greenfield airport would result in a significantly better equipped and more profitable business long term than would be possible with dual airports in Queenstown and Wanaka.


The sections below provide detail of our financial analysis and evaluation.


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Costs of the dual airport strategy

The price of land - $1.2 billion

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image9

QAC is buying a lemon!

The financial future for QAC would be substantially better if it were to relocate to a new greenfield location rather than pursuing its dual airport strategy with Queenstown and Wanaka Airports.


This is the inevitable conclusion from four key drivers:

  1. Much lower capital investment required;
  2. No duplication of operating expenditure;
  3. Increased alternative revenue streams;
  4. Core assets more fit for purpose.


1. Reduced capital investment

The dual airport strategy requires new funds for the substantial investment required -as much as $400 million of new investment into Wanaka Airport (ODT, 1/4/2019), and more into Queenstown Airport (or proportionate increase in Wanaka Airport if Queenstown numbers were to be capped). The only three sources of these funds are reinvested profit, debt, and new equity.


QAC's pre-tax trading profit of $21 million (2018) is inadequate to fund such major investment.  The levels of debt required would burden the company (and by default, as 75% owners, QLDC) for decades, add substantial interest rate costs that erode profit, reduce reinvestment options and stifle community dividends currently used to offset rate increases. New equity, whether funded by ratepayers, AIA, or a new partner, would be contentious and dilute current shareholder value.


In contrast, the sale of QAC's Frankton Flats landholding, with it rezoned as high density residential, would realise $1.2 billion for QAC at today's values. The real value potential of this for QAC increases with each year, as the annual increase in Queenstown land prices exceeds the rising cost of building an airport (Capital Good Price Index for construction). A delta of 6.7% p.a. between these two as for the past nine years would, within a decade, increase the real value (in 2018 dollars) gained from the land sale to over $2.1 billion. 


Sale of this rezoned land would provide sufficient funds to fully pay for a new greenfield airport with no debt overhead. This would massively strengthen QAC's balance sheet and remove the large debt servicing costs QAC's dual airport strategy would otherwise incur on its profit/loss accounts.


2. Avoids duplication of expenses

In a following section we outline the many additional costs of duplicating construction and operation across two locations.


In contrast, relocation to a single greenfield site would consolidate operations and staffing, reduce duplication of operating expenses, enhance the economies of scale and efficiencies, improve expertise and raise quality.


Similarly, for all the airport's client and ancillary businesses, including the airlines, being forced to operate across two separate locations would increase their capital, operational and staffing costs. This would not be compensated for by an increase in customer base, as the dual airport strategy does not increase the passenger numbers, it simply splits them into two places instead of servicing them all in a single, central location.


In this way, the dual airport strategy condemns both QAC and all associated businesses into a future with lower profitability than would be possible if operating from a single central location.  Far from supporting economic value gain per visitor for our region, this strategy undermines it.


3. Increased revenue streams

The opportunity to purchase a substantial landholding, with it all rezoned in one process, would give QAC a significantly broader platform from which to earn revenue. It could become landlord for all the ancillary businesses and would have ongoing opportunity to develop land to accommodate the growth of these businesses.


It would continue to manage Wanaka Airport, focusing its development as a centre for general aviation, maintenance, events and innovation.


It would retain management of general aviation in the Wakatipu. This would include both the vertical take-off and landing zone integrated within the Frankton Flats development, and fixed wing General Aviation (We will latter publish proposals to accommodate GA in Wakatipu).


QAC could also operate the Air Express surface transport that would connect the new regional airport with the region's population centres or derive income from licensing the operator if this was considered outside core business.


It's clear that relocation to a new greenfields site would provide QAC with more diverse and larger revenue streams that would contribute more to its total revenue than possible with the dual airport strategy.


4. Core assets are more fit for purpose.

The dual airport strategy would result in two locations that would always be suboptimal, constrained by geography, topography and neighbours. In contrast, a new location could ensure unimpeded, safe landing and takeoff for scheduled air services at the highest level of excellence in an area inflicting undesirable impacts on far fewer people.


The limitations of Queenstown Airport are glaringly obvious. The mountainous terrain, challenging weather, short runway, limited RESA zones and negative impacts on community and environment all constrict its operation and potential to expand. It is rated among the world's least safe airports for scheduled jet services, resulting in airlines prescribing additional operational limits on their jets, such as reduced wind limits and takeoff payloads reduced by 5,200kg (equivalent to 52 passengers). Queenstown Airport is clearly a suboptimal asset.


The location of Wanaka Airport, with Luggate just two kms off its runway's southern end and Albert Town five kms to its north, will also find its potential challenged by these growing communities. As with Queenstown, limits on runway length prevents future use by wide bodied jets or auto-land operations in fog.


The need to split investment across two locations that is a fundamental feature of the dual airport strategy will restrict the speed and breadth with which technical, navigational and other operational upgrades could be deployed. To introduce the capacity for auto-land infrastructure would, for example, cost about $16 million. The problem with running two airports is that either the $16 million must be invested into each of the airports, totalling $32 million, or if invested into just one of the airports, the benefits it provides would apply to only some of the flights. In contrast, if operating all scheduled flights from a single airport, then such improvements become financially viable sooner, with benefits applying immediately to all flights.


A new greenfield site would ensure all operational parameters are optimised at least cost for all flights. These would include clear and unobstructed flight paths, a full length runway able to gain certification for auto-land operations in case of limited visibility or fog. It would be sufficiently distant from existing population centers to avoid conflict with tens of thousands of residents.


It's clear that a single location would result in QAC being able to provide a much better product for its clients. Airlines and all the other businesses associated with the airport would benefit from earlier and larger investment by QAC to enhance their business performance. These client businesses also wouldn't face the overhead, operational and logistical costs of maintaining services across two locations. Even passengers would be better off, with the majority landing closer to their final destinations.


Leaders' challenge

Who wants to be sold a lemon?


The directors of QAC have a choice. They could pursue a dual airport strategy and lock in high debt, diminished long-term profits and ownership of suboptimal assets against the vehement opposition of their two main communities. Or they could develop a new greenfield regional airport for Central Otago that has no debt, delivers substantially higher long-term profits, and owns assets that offer world class service and safety, while impacting negatively on far fewer people now and into the future.


But at this stage everyone is racing for the lemon. QAC executives present their directors with a dual airport fait accompli, and Mayor Jim Boult dismisses discussion of the relocation option.


It seems the leadership is left to us, the community. As the ratepayer owner, are you content with being sold a lemon? Or do you think the Mayor, councillors, and directors of QAC should properly investigate the option to relocate the airport?


They are unlikely to unless the community pushes them to do so. It is always easier to go with the status quo, rather than investigate blue sky alternatives. But often, as is the case here, the status quo is not the right answer for the long-term.


The following section outlines the costs of developing dual airports. Ironically, our research shows that these would cost more than if QAC were to focus on developing a single new location.


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Costs of the dual airport strategy

The price of land - $1.2 billion

Assess the investment

Queenstown Airport terminal designated as redundant

Cost of Dual Airport Strategy

Two complete rebuilds from scratch

Queenstown Airport Corporation’s (QAC) dual airport strategy is not cheap - effectively entails rebuilding both Queenstown and Wanaka airports almost from scratch and substantive purchases of expensive adjacent land.


QAC's Queenstown Master Plan includes three options.


  • The first would limit expansion at Queenstown Airport to 3.2 million passenger movements. That implies an expansion of Wanaka Airport to accommodate 3.9 million under QAC's dual airport strategy, with forecast demand of 7.1 million passenger movements (pax) by 2045. 


  • The second and third options would scale expansion at Queenstown Airport to 5.1 million pax, with Wanaka Airport accommodating 2 million. The same number as Queenstown Airport in 2018.


Either way, the total new capital investment required would be at least as much as for relocation of Queenstown Airport to a new greenfield site.


Costs if 5.1 million pax into Queenstown - Master Plan options two and three

QAC's initial preference was expansion of Queenstown Airport to accommodate 5.1 million pax by 2045, with 2 million accommodated at Wanaka Airport.


As the graphic above shows, option two would have a new terminal and other facilities located to the south of the existing runway and option three would move them to the north. Significantly, both show the existing terminal and all of its associated infrastructure would no longer be used. 


This means that apart from the existing runway, nearly all of Queenstown Airport's facilities, buildings, plant and equipment, roadways and parking, would need to be built from new.  On top of this effectively greenfield rebuild of Queenstown Airport, QAC estimates the cost of its required new facilities at Wanaka Airport (to service the minimum 2 million pax), at $400 million.


Expanding to 5.1 million pax at Queenstown Airport would require the purchase of the 15.3 hectares Lot 6 from Remarkables Park Ltd, an estimated $100-$150 million. Plus a further 21 or so hectares shown within the yellow dashed lines of the Master Plan diagrams, costing $140-$207 million.


So the additional land QAC would require to expand to 5.1 million pax at Queenstown Airport amounts to $240-$357 million.


Costs if 3.2 million pax into Queenstown - Master Plan option one

The strong community opposition in Queenstown to QAC's proposed expansion of its noise boundaries will likely see a pivot back to the first option in QAC's Queenstown Master Plan. This would distribute 3.2 million of the forecast 7.1 million pax demand each year by 2045 to Queenstown, with the remaining 3.9 million pax to Wanaka Airport.


For QAC's balance sheet, this would have the advantage of retaining the current terminus, valued at $48 million in its 2018 Annual report. Expansion from 7 to 11 aircraft stands would still, however, require relocation of general aviation (GA) and the purchase of Lot 6 from Remarkables Park Ltd, estimated at a cost of $100-$150 million.


In addition to this would be expanding the current terminal by 60% and a complete rebuild of all facilities for GA and visiting private jets.


At Wanaka Airport, the 2.9 million pax of option one would also require the complete greenfield construction of all facilities, including a a terminal and full replacement of the runway to bear the weight loads of heavier jet aircraft.  With $300-$400 million being the estimated build cost to cater for 2 million pax in Wanaka, the cost to cater for almost double that number will be proportionally higher.


Cost of Frankton land purchases

The cost of land purchase for airport expansion in Frankton depends on the price of that land and the amount required. In the valuation report prepared by Seagars for QAC’s 2018 Annual Report, the commercial zoned airport land was priced at $294 /m2, well below the $1,000 to $1,500 per m2 that Frankton Flat developers currently face (May 2019). 


The land adjacent to the airport that QAC plans to purchase would be at a discount because of development restrictions imposed by the airport. Nevertheless, realtors and developers we have spoken said prices for this bare land would range from $650 to $980 per square meter. 


So, depending on whether QAC and QLDC cap Queenstown Airport at 3.2 million pax or increase to 5.2 million, QAC will need to pay $100-$150 million or $240-$357 million for land expansion in Frankton.


Cost of house purchases

In addition to buying this bare land, QAC's Queenstown expansion plans require it to purchase about 40 existing homes that aircraft noise effectively make uninhabitable. At a conservative average of $1.5 million apiece, this totals $60 million additional expenditure. 


In a district where home affordability is at crisis point and in a location that is the most suited for high density residential, this destruction of existing resource highlights the impact of the dual airport strategy. We encourage those interested to also review the global climate change section of this website.


Costs of 2 or 3.9 million pax into Wanaka

QAC is currently engaged in developing its master plan for Wanaka Airport, which it expects to publicly release towards the end of 2019.  Public statements by CEO Colin Keel play coy, suggesting a slow introduction "based on natural demand" of 2 or 3 domestic flights daily, with "the odd charter flight for the ski season" gently testing international flights (The Wanaka Sun 2/5/2019).


But it's difficult to hide that its dual airport strategy aims to split the forecast 7.1 million passenger movements between these two airports.  That means for Wanaka, as happened so quickly at Queenstown Airport, a jet capable runway, full customs and border control, landing lights, night flights, and operational hours from at least 6am till 10pm.


If the Wakatipu community do successfully block expansion of the noise boundaries - capping Queenstown Airport at 3.2 million passenger movements - then the dual airport strategy would have 4 million directed into Wanaka Airport, supplanting Queenstown as the region's main hub.


Either way, it is clear that QAC's dual airport strategy envisages substantial development of Wanaka Airport. A new runway, terminal and other facilities for a 2 million pax airport is estimated by QAC's Naomi Lindsay "between $300 million and $400 million (ODT 1/5/2019). If Wanaka numbers doubled because of capping at Queenstown, these costs would rise proportionally.


The cost of the new build for Queenstown Airport "is still being worked on" (Lindsay, ODT 1/5/2019). If built for 5.1 million pax, it is likely to be some hundreds of millions more than the $300-$400 million estimates for a 2.1 million pax Wanaka Airport.


If Queenstown Airport were to be capped at 3.2 million passenger movements, then the investment would redirect into Wanaka Airport, making its expansion both more urgent and increased in scale.


Costs of duplication

One thing is certain - splitting the market and building two new facilities will be more expensive than concentrating them into one location with one airport. Obvious duplication of costs includes: two control towers, two runways, two taxiways, two sets of landing lights and navigation aids (lights, radar and signal equipment), two fuel storage facilities, and many more.


Less obvious is the extra build cost for two terminals - it will always be more expensive to build two houses than to build one with an extra bedroom.


Then there is the duplication of communications networks, electricity systems, sewerage and stormwater infrastructure, fire protection, security, border control, computer and IT networks, and heating systems. Then add parking and retail spaces, the list goes on.


There will also be greater ongoing operational costs with the need to manage employees, policies, safety protocols and supply chains and so on over two locations.


Where other businesses seek to consolidate operations to improve expertise, and economies of scale, it seems QAC is determinedly pursuing a strategy that will systematically erode its potential profitability and quality without a rigorous study of viable alternatives. Remember, QAC is 75% owned by QLDC so such choices impact directly on our ratepayer base.


The above analysis clealy shows QAC's dual airport strategy would cost more in both capex and opex than relocating the airport to a cheaper greenfield site.


See the subsequent section for analysis of the likely land costs of the dual airport strategy ($100 to $357 million) versus greenfield relocation (around $27 million, including legal costs).


On top of this significant cost burden of the dual airport strategy on QAC (and therefore, its QLDC ratepayer owners) are the huge costs imposed on all airline, tourism, rental car, retail and other businesses who are current clients of QAC, who would have to operate their business in both airports. This is not addressed anywhere in QAC's master plan.


Conclusion

Relocation to a greenfield site on lower value land than prime Frankton FLats would be a cheaper option than what is effectively the rebuild of the existing Queenstown and Wanaka airports. Both in terms of capital and ongoing operational expenditure.


But the pivotal difference is the question of how each option could be paid for?


QAC's dual airport strategy would be funded by debt, while a relocated greenfield airport could be paid for in cash. You can read how in the section below.


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Costs of the dual airport strategy

The price of land - $1.2 billion

Better for QAC

Assess the investment

What would it COST?

Queenstown Airport

to service 5.1 million passenger movements

New Terminal

New Taxiway

New Jet Aprons for 13 jets

New Private Jet facilities

New Fixed Wing facilities

New Helicopter facilities

New Car Parks 12 x current area

plus

Purchase Lot 6 ($134 million)

Purchase additional 21ha ($288 million)

Purchase homes ($60 million)

Pay for soundproofing homes ($10 million)


Wanaka Airport

to service 2 million passengers - same size as Queenstown Airport is now

New Terminal

New Runway

New Jet Aprons for 5 jets

New Private Jet park

New Fixed Wing facilities

New Helicopter facilities

plus

Crowd out existing aeronautical business users

Queenstown Airport showing QAC land plus Lot 6 owned by RPL and additional land needed for Option 2

The Price of Land

How to make $1.2 billion with one decision?

This decision is the financial choice between Queenstown Airport Corporation's (QAC) dual airport strategy and FlightPlan2050's proposal to relocate the airport.


In the preceding section, we compared the capital costs of the two strategies and found that both would be expensive, with the dual airport option being the more pricey in terms of both capital costs and ongoing costs of operation. The main financial difference separating the two strategies is how they would be funded. 


The dual airport strategy requires new money to be invested - from reinvestment of QAC's profits, increase of debt, or increased equity from existing or new shareholders. In contrast, relocating the airport would make the Frankton Flats land available for sale, with this money used to fund construction of the new airport.


The difference between these two options ultimately comes down to the price of land.


Value of land in Frankton

The Queenstown Airport site contains the most valuable greenfield land in the district. Realtors and developers estimate it at an average $1,200 per m2 if zoned for high density residential.


This contrasts with QAC’s 2018 Annual Report valuation of its Frankton landholding at $207m, an average of $157 per m2, well below the $1,000 to $1,500 per m2 that Frankton Flat developers currently face.

 

The Seagars valuation of QAC land (June 2018) that provided this valuation makes interesting reading. In it, residential zoned land owned by QAC was priced at $1,136 /m2 and the terminal land was priced at $880 /m2.


The airport’s 2018 valuation is largely based on current zone rules and limitations under the operative Queenstown Lakes District District Plan. While the airport has 23 hectares zoned Airport Mixed Use and 17 hectares zoned Industrial, 97 hectares are zoned Rural General. This land is priced as low as just $8.90 /m2 for the RESA land and $34.00 /m2 for the general airfield land.


With QLDC being both the District Plan’s controlling authority and a 75% shareholder of QAC, the necessary political will could ensure a coordinated and comprehensive approach to the rezoning of this land in line with FlightPlan2050's Frankton Vision.


This would allow QAC to realise $1.2 billion from the sale of the land (even allowing for 20% of the land to be set aside for public reserve and roading) to create a high quality, high density residential development as we have proposed.


This figure should make us all sit up and take notice.


It is more than the total costs of a full relocation, including the associated costs of relocating of general aviation, and investment at Ladies Mile to make the road a viable emergency runway in time of civil emergency need.


Yes, it would mean we would need to find a new place for the airport and we know that the RMA process for this wouldn’t be easy. But if we could, how would the finances pan out?


Value of land in rural Otago

Relocation would require the purchase of a new greenfield site. How much would that cost?


Farm sales in Otago the last three months to May 2019 averaged $1.67 per m2 ($16,879 per hectare). Developed dairy land, the most expensive, was $3.74 per m2. So the cost of 174 hectares of dairy land (this is the same size as QAC's current 136.5ha plus 36ha it plans to purchase) would be $6.5 million. Arable land would be half that price and grazing land would be a third, just $1.8 million.


Contrast this with the $100 to $357 million purchase of the extra Frankton Flats land required by the dual airport strategy.


Even if it took $20 million in legal fees, as suggested by Tim Brown, Chair of Wellington International Airport (ODT, 4/5/2019), QAC could gain a similar landholding to an expanded Queenstown AIrport, with zoning and consents in place, for less than $27 million.


Increased commercial opportunity

At these prices it would make sense for QAC to purchase a much more substantial property, perhaps ten or twenty times its current landholding at Frankton. With it all rezoned for aeronautical and associated business use, it would provide ample buffer and QAC could be landlord and developer of all the ancillary business, giving it a robust rental income and ongoing potential to raise capital from development or sales. Without the need to impose non-complaint covenants and restrict the development rights of all surrounding neighbours, as is currently - and increasingly so - the case.


Consent and planning

Yes, there is cost, time and risk in the process of seeking consents for such a major change in land use. We will outline this in a separate page, but recent changes to the RMA related to critical infrastructure of national importance would see the RMA process streamlined.


The case for a regional airport that could more effectively distribute regional tourism,  protect the high value destinations of Queenstown and Wanaka from over-tourism and save one billion dollars, would be attractive to government. It could use empowering legislation to make this project happen.


Political will is the key

As Wellington airport chair Tim Brown said, constructing a new airport "isn't that difficult and needn't cost ratepayers" (ODT, May 4, 2019). But, he added, "it would have to involve pretty much everyone who has skin in the game and they would need to be very, very positively engaged".


Political will is driven by community will. The 92.5% opposition to QAC's noise expansion plans in August 2018 clearly showed that community will is against expansion and its manifold impacts.


However, response to date from Mayor Boult, Councillors and QAC suggest this message has not got through in terms of being prepared to investigate viable options to QAC's initial plans. The proposal to relocate the airport has been pilloried by Mayor Boult in the media and neither he, councillors nor QAC have taken up our repeated offers of personal or joint briefings.


It is difficult to influence politics if those holding office are not open to discussing and learning about new ideas.


We hope that QAC and our politicians do take up the challenge to engage with and understand the rationale behind FlightPlan2050's arguments for relocation of the airport, so they can best help our community reach the optimum long-term solution. Because the community quite clearly rejected the idea that our future ought include flights every four minutes during peak hours.


And that was well before this compelling financial analysis showed a relocated airport would require much less new capital, ongoing operating costs and debt, plus give access to over one billion dollars in cash.


It is hard to understand how QAC's rigorous evaluation by QACcould rule out relocation on economic grounds. Particularly, as the subsequent section shows, it would result in QAC becoming a much stronger and more profitable company with a substantially better product to service its client airlines, customers and tenant businesses.


Leaders' challenge

If you were the director of a company with $46 million in revenues and $21 million in profits (2018), and you could see an opportunity to free up $1.2 billion cash, avoid $300 million in debt and reduce opex while streamlining logistics and producing a better product, what would you do?


On the face of it, we think it's a no brainer. An yet there is to date no evidence that either QAC or its 75% shareholder QLDC has done any work to seriously and objectively assess and compare alternative strategies to its proposed dual airports.

  

So the leadership responsibility falls to you and others in our community. What can you do that could motivate QAC directors - and the QLDC councillors who have control over their Statement of Intent - to at least research and consider this option?

 

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Costs of the dual airport strategy

The price of land - $1.2 billion

Better for QAC

Assess the investment

Compare prices

Dual airport land

$300 million more debt for land additions

$60 million more debt of houses purchased


Relocated airport land

$6.5 million for land

$20 million for legal costs

$1.2 billion cash in the bank from the sale of Queenstown Airport land


Frankton land

Developers currently pay $1,000 to $1,500m2

QAC's landholding is valued a $157m2

If rezoned for high density residential, QAC land would likely be worth $1,200m2

So current QAC land worth $1.2 billion


Otago rural land

Dairy, the most expensive, is $3.74m2

Grazing is $1.05m2

Same size landholding as expanded Queenstown Airport is $1.8 to $6.5 million

Legal fees $20 million

image10

Sensible investment?

Poor Return on Assets

The trading performance of Queenstown Airport Corporation is impressive. From revenues of $45.6 million it achieved EBITDA profit of $31.6 million and profit before tax of $21.1 million (2018 Annual Report).


But is it a sensible investment?


The annual Profit and Loss ledger might look good, but the key question for the investor is how much it earns relative to how much they would have to pay to buy it. Based on its 2018 Annual Accounts, QAC's return on its $356 million of assets is a modest 5.9% p.a., and it can only get worse.


Over the past decade, QAC's return on assets has trended downwards. The main reason for this is not a drop in financial performance, rather a consequence of the rapid rise in the value of QAC's landholding. Revaluations have increased the land's assessed value by some $30 million for each of the past three years.


The value of QAC's land will continue to grow out of proportion with its other assets. In 2018, land was 62% of its Frankton-based fixed assets. When we project the growth rate of land value versus that of other assets (based on their relative trends in the past ten years’ annual accounts), by 2045 the value of QAC's current landholding in Frankton would reach $3.8 billion versus just $208M. This creates an increasingly distorted balance sheet overweight with land and forever driving down its return on assets (ROA).


Poor economic use

For the economist, the question is different. Opportunity cost is a tool used to assess an investment. It asks, what else could be done with the resource? In this case, the alternative use would be to rezone QAC's land to High Density Residential. That its value would then rise sixfold shows the current use of the land is very much suboptimal.


Seagar & Partners, the registered valuers who assess QAC land each year, base their valuation on the land's zoning in the District Plan and its designation, which of course is for use as an airport. They assess the land value at an average of $157m2, giving a total value of $207 million (2018). If, as outlined in the previous section, the land were rezoned for High Density Residential use, then the situation would change dramatically. Land in the Frankton Flats and Frankton Flats (B) zones is currently selling for $1,000 to $1,500m2, if you can get it. Residential land is more expensive still.


There comes a time, as farmers in this district well know, when running a business earning meagre profits relative to massive capital value tied up in land seems a crazy practice, and it's time to sell up and move on. This situation has caught up with QAC and its landholding in Frankton Flats.


Queenstown Airport is vital infrastructure

Unlike the farmer, an airport can't always just cash up and move out. QAC is not a regular normal business as it provides infrastructure essential for the economic life of this region.


While airports can generate revenue and have trading profits, they share many of the characteristics of core infrastructure. As such, they are not always expected to be profitable or have market rate ROA. Sewerage systems, water supplies, roads - none of these make profits and we fund them through rates.


In the case of Wellington International Airport, for example, it has nowhere it could relocate to and still be the vital transport link the city needs. Regardless of how expensive its flat land might be, its stuck where it is. To expand in order to accommodate larger aircraft it faces the exorbitant expense of pushing a 355m runway extension out into Cook Strait at an eye watering $1 million per linear meter (WIA Chair Tim Brown, ODT 4/5/2019). Queenstown Airport would face similar costs should it ever want to take wide-bodied jets, which would require expanding over either Lake Wakatipu's Frankton Arm or the Shotover Delta.


Alternative locations are available for Queenstown Airport

In the case of Queenstown Airport, however, we do have a choice. The airport could be relocated within an acceptable distance of Queenstown (less than 1 hour) and still fulfil its essential function for our district.


The changed location would, in fact, improve its infrastructural role to serve our larger region, bringing it closer to the other key centres of Wanaka, Cromwell and Alexandra where more than half its passengers are destined, while at the same time removing current restraints on its capacity to grow and adapt.


Relocating would be better for tourism

This was a strong message in Air New Zealand's submission to the proposed expansion of Queenstown Airport noise boundaries (Air NZ, Aug 20, 2018) where it said:

"We need to think nationally about delivery of visitors to regions, so that visitors can be delivered to hubs from which they can disperse widely. We need to resource visitor hubs accordingly, so that infrastructure which serves tourism and delivers GDP growth does not either starve or crowd out local communities."


Queenstown's community is already "crowded out". This is evident from Tourism Industry Aotearoa research that shows our local community at odds with the "mood of the nation".  Most New Zealanders welcome the economic benefits of tourism,  with 78% happy with the level of tourism growth. This is not the case in Queenstown. In our community, 76% of locals think there is too much pressure from tourism, 71% think tourism results in increased traffic congestion; 69% in increased risk off traffic accidents; 50% in increased congestion in walking areas; and 54% in damage to the natural environment.


That's not a surprise when Queenstown Airport has assumed the role of regional hub, with just 43% of passengers specifically travelling to Queenstown, while the remaining 57% are in transit to Wanaka, other Central locations and to the south.  The direct consequence of this is that more than half the negative impacts of the airport and aircraft - in terms of congestion, noise, loss of development rights of property owners within the air noise boundaries and so forth - is caused by passengers who bring absolutely no benefit to the Wakatipu community. 


Wide-ranging economic benefits of relocation

Looking beyond the narrow business case, the economist would assess the costs and benefits across the full economic and social spectrum.  Our investigations have revealed that relocating the airport would have significant positive effects across all sectors. It would be better for Frankton, the Wakatipu, Wanaka, and the region. Better for the community, tourism, local transport, the environment, and global climate change. Better financially for housing affordability, for ratepayers and for the airlines. 


We outline these extensive benefits in more detail on the page Everything gets better


With all these positive outcomes being possible, we wonder why how is it that the option to relocate the airport hasn't been considered or investigated by QAC or by council. It seems the only obstacle standing in the way is attitude, the ingrained resistance to change.


Economist John Maynard Keynes famously asked, "When the facts change, I change my mind. What do you do?"


Leaders' challenge

Thank you for investing the time to read the thinking, rationale and research behind FlightPlan2050’s proposal to relocate Queenstown Airport as a long-term solution to meeting sustainable air traffic growth in Central Otago. Obviously, what this level of air traffic growth might be has not yet been settled - in fact, none of those in charge of making decisions appear to even be facing the question.


You'll be aware that FlightPlan2050’s proposal has been shelved as irrelevant and silly by Mayor Boult. To date, despite each being offered briefings, neither the mayor, QAC directors nor any councillor has been in touch with FlightPlan2050.


But the facts have changed since Queenstown Airport was registered on the old Frankton horse racing track in 1936.  So we disagree with Mayor Boult that this is a good reason to leave it there.  There were neither thousands of people living on its perimeter, nor millions of people arriving at it each year. 


And if we are facing these pressures now - what will the pressure to expand and accept even more costs (economic, environmental, lifestyle) be like in another 30 or 50 years when, yet again, QAC wants to breach its permitted noise boundaries?


Now is the time to look at viable options. Relocation is a viable option - but so far, QLDC and QAC are refusing to properly investigate it. Public pressure could motivate them to do so.


This is election year. If you agree that relocation of Queenstown Airport should be properly evaluated as a long-term solution for the ever-increasing pressure on Queenstown and Wanaka Airports, please communicate with our councillors, council candidates and QAC directors.


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Costs of the dual airport strategy

The price of land - $1.2 billion

Better for QAC

Assess the investment