Fog sits on Wellington Airport's runway in January. Photo / Mark Mitchell
Fog sits on Wellington Airport's runway in January. Photo / Mark Mitchell
Wellington City Council has promised support to Wellington International Airport if it needs it, in a deal similar in structure to the Government's rescue of Air New Zealand.
On Thursday afternoon, in a publicly excluded session, councillors voted to take part in a deal alongside majority shareholder Infratil, an investmentfund controlled by Wellington investment bank Morrison & Co.
The terms of the support have not been signalled in detail, but it is expected to be worth up to around $70m in total.
Wellington City Council owns 34 per cent of the airport, suggesting it was offering around $20m, although the nature of the deal means the money may never be provided.
According to a statement from the council, the support "would be through an underwrite of a convertible equity type arrangement", meaning if the airport drew on the money it could convert into new airport shares to reduce its borrowing.
The promise meant the airport could access the money quickly if needed, which "provides comfort to the airport and its lenders that the shareholders are there and supporting the company if necessary," the council spokesman added.
"The council voted to support the proposal and the details will now be worked up with the company and Infratil to finalise the arrangements."
The deal appears to be broadly similar to that announced by Finance Minister Grant Robertson on March 20, under which the Government promised to lend up to $900m to Air New Zealand, with the option for the loan to be converted into shares if the airline required.
It is possible Air New Zealand will never call on the loan, as the airline is able to use the promise of support to convince banks they should continue to extend it credit.
Highly profitable in recent years, the closure of New Zealand's borders and national lockdown has meant the airline has only a few freight and repatriation flights offshore, and a skeleton domestic schedule.
The turmoil for airlines has a direct impact on New Zealand's commercial airports, typically owned in part by councils.
Auckland Airport admitted it had been operating outside the terms of its banking covenants when it launched a successful $1.2 billion share placement through the NZX earlier this month.
Wellington Airport began laying off staff this month and has been paid around $900,000 through the Government's wage subsidy scheme.
Wellington Airport's shareholding is far simpler than Auckland's, which would make providing support simpler if both shareholders agree to back the move.
But the proposal comes as the council is facing significant cost pressures, loss of revenue and calls for a freeze on rates.
