KEY POINTS:
The Canadian bid for Auckland Airport poses some awkward questions for those who might find it more attractive than the Dubai offer, now effectively withdrawn. The detail of the Canadian proposal remains to be announced but the price is bound to be lower than Dubai Aerospace Enterprises would have paid. And the prospective owner is a pension fund, hardly likely to bring the knowledge, connections and commitment that DAE could promise.
The Canada Pension Plan Investment Board intends to submit a proposal for no more than 49 per cent of the airport company, which would allow the Auckland and Manukau City Councils to retain their combined stake of 23 per cent. But if that makes all the difference to our timid local body leaders, and would-be leaders, they are splitting hairs. A 49 per cent stake would give all-but effective control of the company. The outcome would be little different than if DAE had got its desired 51 per cent, except that the pension plan would likely be a passive owner and unlikely to add the same value.
Sadly, the Dubai company has pulled out just as the Auckland City Council was due to discover at a special meeting last night that the proposed reshuffle of the airport share register could have improved the council's return by about $111 million over the next eight years.
The council's staff have advised it to amend its 10-year financial plan so that at least some shares may be sold in circumstances where a reduced holding could maximise its financial return. Some council members understand that advice, others do not, and probably would not sell shares if they did. Public wealth, as they conceive it, lies in mere ownership of an asset, not the value of services the asset can be made to produce by an entrepreneurial buyer.
With local body elections pending even savvy candidates are ducking a sale of airport shares. The one admirable exception is Auckland's incumbent Mayor, Dick Hubbard, who has consistently urged the city to keep its options open. But the Citizens and Ratepayers ticket is playing safe, "listening" to public opinion rather than trying to lead it. Public opposition to the sale of airport shares must have been anticipated by the airport company and DAE when the bid was announced in an election year. The Dubai group has called off the deal on two grounds, one of them specious - Air New Zealand's latest quibble over landing fees - the other more credible. They believe the airport company has not done everything it could to help the bid succeed.
The airport company's present ownership is "not sustainable", in the view of the council advisers. The two councils are the largest stakeholders with just 23 per cent between them. They have been passive holders, unrepresented on the board, and no other part-owner has been in a position to exert effective control. The directors and management have run the company much as they see fit.
No management in that position would welcome a big buyout, though recognising it must happen sooner or later. Several big buyers have been circling Auckland International Airport Ltd for some time and some sort of entity is going to get control. The Auckland and Manukau councils need to be thinking carefully about what sort of entity it should be.
If a Canadian pension plan is preferable to an Arabian airports operator they will need to offer sound reasons. Needless to say ethnic considerations should not enter the equation. Councils and candidates owe voters a more serious discussion of the airport's inevitable purchase than we have heard so far. It needs an imaginative buyer independent of any airline and capable of making the most of its place in the world.
