Saturday 7 November 2015

Runway questions

Wellington City councillor David Lee is asking the right questions about the proposed Wellington Airport runway extension.

All proposals thus far have the airport, one-third owned by Wellington Council and two-thirds owned by Infratil, paying for about a third of the extension's costs; the remaining two hundred million would have to be covered by central government and councils in the region. Different numbers float around, but it would be in that ballpark. I'm not sure whether the funding would be provided as a straight subsidy or whether the funders would be taking an equity position.

Lee critiques the economic impact assessment that highlighted the substantial effects that a big increase in airport traffic could bring. But economic impact analyses are not cost-benefit assessments and pretty typically count things like total visitor expenditure rather than net profit. NZIER pointed out the numerous differences between CBA and economic-impact figures in their rather thorough critique earlier this year.

If the projections in increased flights are right, and there's still about a $200 million gap that can't be recovered through slotting fees on the increased long-haul traffic, then any CBA would need to show real net external benefits of the project in the order of $200 million. Council could be persuaded by ones where the benefits include diversion of traffic from other parts of the country; central government should be looking for real evidence of net benefits to the country as a whole after accounting for diversions from other airports.

It's entirely plausible to me that we'd see an increase in flights from the Singapore hub to Wellington with the airport extension; players that currently don't fly to New Zealand might tap in and wouldn't have been included in existing surveys. But is it plausible that we get $200 million in real net external benefits from the extension? It'll be interesting to see the cost-benefit assessment when it comes out.


  • Optimal airports, in which I critiqued some of the benefits suggested for an extension.

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