Monday, March 7, 2011

Auckland Airport CEO on Queenstown Airport Fracas

In a Share Investor Q & A with CEO of Auckland International Airport Ltd [AIA.NZX] Simon Moutter coming up tomorrow, Simon gives his view on the dispute that has arisen over the Auckland ports purchase of a stake in Queenstown Airport that has ruffled feathers in Queenstown local political circles and the boardroom at Air New Zealand Ltd [AIR.NZX].

He is candid in his answer of my question about the dispute that was instigated by three other parties as he is also candid in the other questions he has answered.

Here is my question from the full interview:

SI - On the purchase of a stake in Queenstown Airport late last year. Please explain, from your point of view, why there has been so much opposition from some quarters down in Queenstown and specifically from Air New Zealand?

SM - The local opposition to the investment seems to be almost totally driven by concerns about the process adopted by the Queenstown Airport board. The Board, a group of independent and local people, decided to issue new shares to Auckland Airport under powers included in the constitution given to it by the Queenstown Lakes District Council.

This power in the constitution was used exactly as designed – to allow the Board to exercise commercial judgement in the best interests of the airport and the community. This is consistent with good corporate governance, which involves having clear rules that delineate the respective roles of shareholders, directors and managers. In contrast, opponents of the deal believe that the Board should have passed the process over to the Council, which would then have undertaken community consultation before making a decision. As would any business, we preferred the certainty achieved through the deal we negotiated with the Board.

We’re now focused on demonstrating to the Council and the Queenstown Lakes community that we are a good shareholder who is making a real, positive contribution to Queenstown Airport and to the regional economy. Our status as NZ’s pre-eminent international airport and our relationships with many of the world’s top airlines mean we can offer value to Queenstown that no other partner can.

Regarding Air New Zealand, I must admit I’ve struggled to understand their opposition. I note they have publicly stated a desire to own a shareholding in Queenstown Airport themselves, so perhaps this is behind their stance. Air New Zealand has claimed our investment will push up airport prices at Queenstown, but I believe this is a red herring as Auckland Airport's current charges to airlines are, on average, lower than Queenstown Airport's. This opposition to an alliance also seems at odds with their own desire to form a similar sort of alliance with Virgin Blue.

Disclosure: I own AIA shares in the Share Investor Portfolio

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