Auckland local government luminary Sir Barry Curtis says Wayne Brown and Auckland Council are taking short-term and unnecessary action in pushing to sell the city's shares in Auckland Airport
Opinion: Auckland faces the prospect of its strategic and intergenerational shareholding in the Auckland International Airport being sold. This must never happen.
Having successfully fought the respective takeover proposals of Dubai Aerospace Enterprise and the Canadian Pension Plan Investment Board in the period leading up to the council amalgamation in 2010, I appeal to the citizens of Auckland to resist the current Auckland Council Mayor’s proposal to sell our shares.
It makes no sense, and the Auckland public will be the loser. The current council shareholding in the airport is strategic.
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The Auckland Council inherited the shares from only two of the amalgamating councils, Manukau and Auckland. The other five territorial councils had long sold their interests. The combined value inherited by Auckland Council was 22 percent of the Airport ownership. The amalgamated council also inherited two Directors on the Board of the Airport company, one nominated by Manukau, another separately nominated by Auckland City Council.
Unfortunately, in 2015, the Auckland Council chose not to follow this practice of nominating a board member, a matter I find totally mystifying. Before Easter in 2020, the Auckland International Airport company board utilised fast track Covid-19 rules to raise $1.2 billion in capital, specifically excluding all major shareholders including the Auckland Council. This resulted in the Auckland Council’s shareholding being reduced to 18.5 percent.
Considerable value was lost because, unlike the Manukau City Council, it failed to protect ratepayer interests.
I campaigned strongly against the takeover proposals of the Emirates and the Canadians when I was Mayor of Manukau.
Entry ports to our city, both air and sea, are vital infrastructure to the Auckland and national economies and indeed, our security interests. They must not be forsaken. Only local public ownership, in part or whole, can safely secure the long-term interests of our city.
To protect Manukau’s interests the council purchased additional shares to lift its shareholding above 10 percent. This provided us with a ‘blocking share’ to protect our ownership. We participated in capital raising to protect our value and stop the diluting of our significant shareholding.
We successfully lobbied Central Government to change the rules around foreign ownership. We received regular, ongoing and substantial dividends which assisted to achieve lower rates.
The value of Airport company shares continues to grow. At the time of the Canadian Pension Fund’s first bid in 2007 the shares were listed at $2.80 per share. The offer was for $3.65 a share. Dubai Aerospace bid was slightly more. Since amalgamation, the combined value of Manukau and Auckland’s shares have more than tripled, a gain of $1.2 billion to Aucklanders. The current value is over $8 a share.
The Auckland Council has received well over half a billion dollars in dividends and a share buy-back from 2010. While no dividends have been received during the Covid pandemic, AIAL has indicated a resumption shortly.
The value of the Auckland Airport company, with its very large commercial and retail interests, will continue to grow. The Auckland Airport was built with public monies. It was owned and developed by the former Auckland Regional Authority until corporatised by central government in 1988. The Company was established with local government in Auckland owning 51 percent, but unfortunately, all but Manukau and Auckland sold their ownership interests.
I can only surmise at the huge loss of value and income by these other councils. The current Mayor of Auckland believes that being the largest shareholder is not strategic. This is simply not true.
The combined leadership of the two pre-amalgamation councils proved that a significant shareholding of around 20 percent does offer the opportunity to nominate directors onto the board to influence the direction of the company.
Good leadership involves long term vision, strategy and communication. Successful civic leadership requires that those leaders work in the best interests of the diverse communities they represent.
In this case the Auckland Council must protect the city’s interest in New Zealand’s main gateway to the world. It must not use short-term thinking and sell our shares in the Airport company. It must be more aggressive in strategically managing our shareholding.
Selling the shares will only give a very short term ‘band aid’ to council finances without addressing the root causes. If the Auckland Council cannot do these things, Auckland must take another look at governance in the region. The non-adopted recommendations of the 2010 Royal Commission into Auckland should be a start. We would at least have a more competitive and contestable environment on critical issues such as income and cost management as well as the strategic airport shareholding.
