Why Councils should not own airport companies

The Herald reports:

Auckland City and Manukau ratepayers will foot a $28 million bill as their councils move to secure their stakes in Auckland Airport.

The cities’ cash injection is the result of the airport company’s announcement yesterday of its plans to issue new shares worth $126 million to help pay for its purchase of a 24.55 per cent stake in Cairns and Mackay airports in Queensland.

Auckland City Council has a 12.71 per cent holding in the airport at Mangere. Manukau’s is 10.01 per cent.

To maintain those stakes, Auckland City needs to spend $16 million and Manukau $12.66 million buying extra shares.

So Auckland ratepayers have just been forced to invest in a speculative purchase of airports in Queensland.

People emotionally like the idea of their Council owing their local airport, but really there is no reason ratepayers should be in these investments.

In the case of AIAL, the Councils own under 25%, so are far off a controlling interest. If the stake is over 50% one can claim there is some value in being able to veto major decisions and appoint directors, but the Auckland Councils don’t have this ability.

But the bigger issues is that in a globalised world, these companies do not just own local assets. AIAL now owns two Australian airports. Now that may be a fine investment for those who have made a choice to invest in AIAL, and back their investment strategy. But it is not appropriate Auckland Councils are risking ratepayer money in these investments.

Even worse they have to borrow money or levy ratepayers to fund the expansion plans. They do not have to take up the rights offer, and should not.