ANDREA FOX

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BusinessDay.co.nz

Queenstown community hopes that Auckland Airport could be persuaded to unwind its new shareholding in the busy South Island gateway to avoid costly court action have been dashed.

An Auckland Airport spokesman said the listed company, which bought 24.9 per cent of Queenstown Airport for $27.7 million in a behind-closed-doors deal in July, had no intention of reversing the deal.

“We are totally committed to establishing an excellent, long-term relationship with the Queenstown and Lakes District Council to help grow Queenstown’s tourism industry and we do not wish to unwind our shareholding,” he said.

The new Queenstown district council had been urged by a community business group opposed to the deal to persuade Auckland Airport to voluntarily unwind the deal.

The Queenstown Community Strategic Assets Group, is challenging the deal in the High Court. It has also urged the new council, voted in in October, not to approve or allow Auckland Airport to buy a further tranche of shares which would take its stake to 35 per cent.

The council previously owned 100 per cent of Queenstown airport, which posted a 31 per cent increase in international visitors in the three months to the end of September.  More than 264,000 passengers used the airport and domestic travellers increased by 18 per cent.

The shares sale deal, which Auckland Airport has called a “strategic alliance”, is also being challenged in separate High Court proceedings by Air New Zealand, which has expanded its action to include directors of Queenstown airport. The council is a defendant in both actions.

In a recent presentation to councillors, the community group suggested the council get quality independent legal and commercial advice, stop defending the action in court, and ask Auckland Airport to back out of the deal.

Both legal challenges allege that the share sale, which was completed without public consultation and a competitive tender process, was unlawful because it breached  requirements of the Local Government Act.

Other defendants in both cases are the Queenstown Airport Corporation, owned by the council, and Auckland Airport. Hearings are expected in May next year in Christchurch.

Details of the strategic alliance have been sealed by the High Court.

Skyline tourist attraction company chairman Ken Matthews Matthews suggested councillors ask why the Queenstown airport board had been “spooked” into issuing shares.

“Queenstown has not fallen off the tourism map and there isn’t another airport coming to town. Arrival trends and prospects remain positive..money is available from a variety of sources to sound operators with quality assets and market positions….the airport has not apparently and suddenly become alienated from the support it has had in the past from local businesses and airlines.”

He questioned the terms of the “strategic alliance”, asking were they “good enough to give away 25 per cent of our strategic asset?”

There was a misconception that as long as a shareholder retained more than 50 per cent it was in control. “Effective control is lost once a party has greater than 25 per cent of voting rights.”

Mr Matthews suggested the two airport companies were incompatible.

Auckland Airport had a market capitalisation and balance sheet many times bigger than Queenstown’s. “Size determines style and agendas. Is this going to be a good fit from a local perspective, in the boadroom and in the community? Will they enhance or prejudice relationships with others like customers – in our case airlines and visitors?

He contrasted the ownership and cultures of each company, saying one had a responsibility to its ratepayers, the other to its shareholders. Auckland Airport had an unproven track record in shareholder strategic alliances, he said.

Auckland Airport declined to comment further, as did Air New Zealand. The airline has not spoken publicly on why it wants the deal overturned, but it is understood its historic tensions with Auckland Airport over airport charges make it concerned about Auckland’s influence on pricing and other commercial activities at Queenstown.

“…Why would we poke our biggest customer and source of revenue and support in the eyes?, Mr Matthews said.’

Most councillors and stakeholders were kept in the dark about the negotiations, he alleged. “If it such a great deal, then why the secrecy? That doesn’t add up.”

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