PPQ - Profit vs Planes Question

This is an interesting piece... It raises the question of the importance of airport profitability, an issue that many regional airports have to face... but the question is, are airports essential infrastructure? Can land just be rezoned to wipe an airport out of existence?  

It was a waiting game for Duane Emeny as he spoke about the future of his family’s business on the Kāpiti Coast. Emeny, general manager of Air Chathams, spoke to Stuff for a story on the economic impact of a potential closure of Kāpiti Coast Airport. But he was, at that very moment, mostly concerned about the suddenly very-real economic impact of a second round of Covid-19. “It’s the thing we wanted the least,” says Emeny. It was Friday, and Emeny, like the rest of New Zealand, were waiting to hear whether the Government would decide that afternoon whether to lift, extend or expand covid-19 restrictions in response to a surge in cases. The renewed uncertainty over Covid-19 came the same week as concern spread that the airport was at risk of imminent closure. The land, about 40 hectares used directly for airport activities, might be rezoned and developed as housing. The airport sits right in the middle of Paraparaumu, near the onramp to the Kāpiti expressway, near the exit point to Kāpiti Island, and near the town’s suburbs. Airport owner NZPropCo bought the airport last year from Todd Property Group as part of a nationwide package of properties. It said no decision was made to close the airport, but it was reviewing all its options. The company pointed out the airport faced significant economic viability issues since Air New Zealand pulled out in 2018 – compounded by the impact of covid-19. It also had significant safety concerns about the looming departure of air traffic control services announced by Airways. These services started after a 2008 mid-air collision that resulted in three deaths, the company said. Before the latest covid-19 problems, Air Chathams’ Kāpiti service to Auckland was going well – even after the lockdown. That changed on Tuesday night, Emeny said. “We don't really know how bad it might be, because we’re still waiting like everyone else...it depends on the duration and the government support, I wouldn't say it’s necessarily terminal, but it’s going to put a lot of pressure on a lot of things.” He said they put on several additional flights to get people in and out of Auckland on Wednesday then suspended all flights on Thursday and Friday. Speaking to Stuff again on Sunday, he said flights would remain suspended till August 27, when covid-19 alert levels might change. Emeny said the case for keeping the airport could be argued around accessibility and “the ease of getting into an area to do business”. ‘It’s not actually just about local residents getting into Auckland but it’s also the other way around.” In an age when the Government was throwing around cash at the provinces to keep the economy alive, it pays to have a flight service into your area. Emeny said the eastern Bay of Plenty was an example where the airline had to tweak its Auckland services thanks to provincial growth fund cash flowing into that region. “They needed to get people down into those areas, so they can carry out their work and get home as well.” Of the airline’s services, Kāpiti and its business travellers bounced back most strongly after Covid-19 restrictions were eased earlier this year. This was because getting into Wellington City, or to Palmerston North was a real challenge for locals. “We thought there might be a level of anxiety there, but they just returned straight away.” The Coast was home to many “well-qualified and educated people. They want to live somewhere beautiful, they want to wake up and look at the sea every morning, but they still need to have the ability to jump on a plane at their local airport...if they didn’t have that then they would probably look somewhere else that does provide it." That, he said, was the intangible benefit: people might not even look at shifting to Kāpiti if it did not have its airport. That makes sense to Waikanae Beach resident Paul Webb, who, pre-lockdown, was a committed traveller to Auckland from the airport. Webb said if he wanted to fly out of Wellington to Auckland, he would have to catch the earliest flight or risk getting stuck in traffic and missing his flight. He would have to leave home before 5am, “which is not particularly nice”, then head to Auckland for a full day’s work, then head back at a flight between 5.30pm to 6.30pm. Or on the other hand, he could drive 15 minutes to Kāpiti’s airport, find cheap parking and leave. It was much easier, much more relaxed, “and you haven’t got the grief of the travel backwards and forwards. I think this district gets shortchanged and overlooked,” he said. In 2018, Kāpiti Coast District Council commissioned an estimate of the airport’s economic value. The report said the net economic benefit annually for Kāpiti Coast was $4.3 million, based largely on travel and time savings for residents ($3.4m). There were smaller amounts gained through recreational value, tourism, and direct employment. The council paid at least $150,000 over three years to help market the arrival of Air Chathams as the service provider to Auckland. In the first year the airline had more than 40,000 passengers on about 1472 flights travelling between Auckland and Paraparaumu. However, a spokeswoman for NZ PropCo said the economic evaluation was now “well out of date”. She said it was prepared on airlines flying multiple routes serving 53,000 passengers annually, but this was no longer the case. “Passenger numbers are now far less than that.” The airport was only paid for landings, at a fee of $102 per landing, she said. Currently, post-covid-19 Air Chathams had eight scheduled landings at the airport. Unlike Air Chathams, the airport received no local or central government subsidy. “We are more than happy to listen to any economically viable solutions that the community may wish to suggest.” The company met members of the community and would continue to “work to understand what the future of Kāpiti Coast Airport looks like”. For mayor K Gurunathan, the future of Kāpiti airport could be linked to the future of the district’s $2 billion worth of roading projects. Gurunathan said that once Transmission Gully and the northern section of the Kāpiti expressway were finished, then it would make it easier to get to the airport. “The catchment of the airport will increase north and south.” This meant people living in Porirua could easily drive up and head to the South Island or to Auckland from the airport. “Which means we are taking away traffic flow going through Wellington City, through that congestion area.” Kāpiti Coast Chamber of Commerce chairwoman Jacinda Thorn said the airport news was part of broader growing uncertainty for the district. Paraparaumu sits in the middle of the two massive roading projects but both were potentially delayed by years, and neither appeared to have an official opening date. “I fear there’s going to be a domino effect, if we have the roads delayed, and then the airport goes, and we’ve got delays to the north, and now we’re dealing with a second wave of covid. The economic impact here can't be underestimated.” Like the rest of New Zealand in 2020, there are few certainties, and an uneasy wait for the future.

Source : https://www.stuff.co.nz/business/122446517/what-is-an-airport-worth-the-economic-cost-if-the-planes-stop-flying