Mike Purchas: Airport shares offer concerning

Mike Purchas

It was with some concern that I read that the Crown's 50 per cent ownership of Hawke's Bay Airport has been offered to Treaty of Waitangi claimant group Mana Ahuriri.

Why should we care? Because of the potential impact the airport has upon our regional economy. We all know that Hawke's Bay is geographically isolated, but many people are unaware that Napier-Hastings is ranked as the fifth-largest urban population in New Zealand, behind Auckland, Wellington, Christchurch and Hamilton.

Auckland, Wellington and Christchurch are all well served by more than one airline and also have direct transtasman flights. Hamilton residents only need to drive a little over one hour to reach Auckland airport.

Consider the benefit to our regional economy if Air New Zealand didn't have a virtual monopoly here that allows it to keep airfares as high as the market will bear. Imagine if Hawke's Bay flights were consistently as cheap as they are between the other major urban populations. Throw in a couple of direct transtasman flights per week for good measure and consider the positive effect on our regional economy.

How much influence does the airport company have on this? Right now, almost none. A common misconception is that Hawke's Bay Airport Ltd is empowered to put the interests of Hawke's Bay's regional economy ahead of its own profitability. Unfortunately this is not the case. The behaviour of Hawke's Bay Airport Limited is defined by a document called a statement of intent.

This document states the objectives of the company as agreed by its shareholders, currently 50 per cent Crown, 24 per cent Hastings District Council and 26 per cent Napier City Council. Incredibly, there was nothing in this document until recently that required the airport company to recognise that it had a responsibility to the Hawke's Bay community in the way it manages such strategic infrastructure.

From a business perspective, the airport company does perform well, making over $1 million in profit per annum.

My interest is in how much our regional economy might be better off if the airport company was instructed by its shareholders to operate itself in a manner that produces the best outcome for our community and is less concerned about its own profitability.

For example, if the airport was enabled by its shareholders to spend that $1 million plus per year on inventive ways to make the route viable for a competing carrier to operate here, or perhaps towards implementing a plan for the eventual introduction of direct transtasman services. An economic impact report from BERL certainly supports this approach.

In 2007 BERL forecast this would result in over $40 million in regional benefit for Hawke's Bay -- every year. A pretty good return on investment.

However, unless Hawke's Bay Airport Ltd is empowered by its shareholders, it will continue to make decisions that are largely constrained by the impact upon its own bottom line.

So, back to Mana Ahuriri. Today Hawke's Bay Airport Limited is owned by taxpayers and ratepayers through the Crown and two of our local councils. The Crown has offered Mana Ahuriri first right of refusal to acquire its 50 per cent share of Hawke's Bay Airport Limited, valued at around $8 million, as part of its Treaty settlement. If Mana Ahuriri accepts the shares, what approach will it want the airport company to take in its management of this strategic infrastructure? It would not seem unreasonable for Mana Ahuriri to want the airport company to keep its focus on its bottom line.

Will this close the door to the possibility that the airport company may one day start making decisions that put our community and regional economy more firmly ahead of its own profitability?

 Mike Purchas is a business owner and independent director of Business Hawke's Bay. Business and civic leaders, organisers, experts in their field and interest groups can contribute opinions. The views expressed here are the writer's opinion and not the newspaper's. Email: editor@hbtoday.co.nz