WCC should sell their airport shares

Stuff reported:

Wellington City Council has voted 10-4 to retain its stake in Wellington International Airport.

The vote came as a surprise because it was initially intended to be held in secret during a session of the council’s finance and performance committee that excluded the public.

The vote was revealed after a last-minute vote to open the meeting to the public.

The council owns a 34 per cent holding in Wellington International Airport. The remaining 66 per cent share is owned by Infratil.

This was a very disappointing decision, especially as WCC could have used the cash from any sale to help finance infrastructure that the Council actually needs to own. There are many reasons why WCC would be better off selling the 34%.

1. As a minority shareholder you end up at the mercy of the majority shareholder. They decide how much money goes into dividends, into expansion, into capital etc etc.
2. Any directors you appoint have to act in the best interest of the company, not WCC. More often than not they end up representing the airport to the Council, rather than the Council to the airport – on fact they are basically legally obliged to. So it is a myth that appointing a minority of directors gives WCC meaningful sway over decisions.
3. When the airport faces regulatory issues, the Council is conflicted between its role as regulator and part-owner and will tend to favour the airport over residents.
4. When the airport makes requests for funding, the Council is even more hopelessly conflicted and rather than regarding funding requests with a sceptical eye, bend over backwards to give the airport or airlines money, in the belief that it may drive tourism. Hence the money to Singapore Air for flights to Canberra etc.

The problem is Council has so many leftish ideologues that won’t look at the ownership on its merits. They are wedded to the status quo no matter how stupid it is. What they should be doing is looking at it from a opportunity viewpoint. If the Council suddenly had say $400 million would it really think the best use of that money is a 34% share in an airport as opposed to water infrastructure, housing etc.