John MacDonald: What should the Crown do with its Christchurch airport shares?

After all his talk about asset sales, David Seymour has obviously been scratching his head like the rest of us, wondering what we’ve actually got left to sell. And he’s got Christchurch Airport in his sights.  

The Government —or the Crown— owns a 25% stake in the airport (which is the second largest in the country) and the ACT Party leader is saying today that he doesn’t think it should. And I agree.  

Remember, 75% is owned by the Christchurch City Council, and it’s the other 25% that Seymour thinks should be sold because he doesn't think owning an airport is core business for the Government.  

I think it’s a great idea, but not for exactly the same reason as David Seymour.   

He thinks an airport shouldn’t be a government activity. I don't care too much about that side of it, because the Government —or the Crown— has its fingers in all sorts of pies, doesn’t it?  

My support for this comes down to numbers. And whether you and I would be better off if the Government stayed involved in the airport company or not.   

So David Seymour is saying today: “ACT believes that owning an airport isn’t part of the Government’s core business and would support selling its share so the money can better be used elsewhere.”  

He says: “Whether that means better infrastructure, better healthcare, better education services or homes for the next generation.”  

And the reason I think this idea is a winner has nothing to do with me saying “yeah open the doors to anyone with money”. It’s not me agreeing with Seymour that governments shouldn't be involved in things like airports.  

It’s got nothing to do with those things.  

And if you’re familiar with my views on assets, you might think it’s a bit weird that I’m supporting Seymour on this one. Because, generally, I don’t consider anything to be an asset unless it’s making money - and the airport is making money.   

It’s making money for the Crown and it’s making money for its majority owner, the city council.  

But if you dig a little deeper into the numbers - that’s where the argument in favour of the crown selling its 25% share lies.  

In the 12 months until June last year, the airport company reported an underlying net profit after tax of $41.8 million. That was from revenue in the 12-month period of $233.1 million - a 15% increase on the year before.  

And, once they’d done things like taking into account changes to depreciation rules, the actual result for the year was $22.7 million.  

Here are some more numbers: 

All up, the airport company is worth more than $2.3 billion.  

So, if we do some really raw mathematics, let’s say the crown’s 25% share is worth $575 million.  

And if we take the crown’s 25% share of last year’s actual profit, that comes to about $5.7 million.  

So, what would you prefer? $5.7 million in a year or $575 million in a one-off transaction?  

The Crown could sign a deal and get $575 million. Or, based on last year’s profit level, it could wait 100 years to get the same sort of return.  

Based on those numbers, I think it’s a no-brainer. And I don't expect to be the only one thinking this is a good idea.  

Just a few days ago, Mark Lister from Craigs Investment Partners said Christchurch City Council missed a trick when it decided against asset sales. He reckons Christchurch Airport is an attractive asset, which is all the more reason for the Crown to sell-off its 25% share.  

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:06):
You're listening to the Canterbury Morning's Podcast with John McDonald
from News Talk ZB.

Speaker 2 (00:12):
So after all his talk about asset sales, David Seymour
has obviously been scratching his head like the rest of
us because we have him, we wondering what the hell
we've got left to sell, and he's got christ Toch
Airport in his sights. The government or the Crown owns
a twenty five percent stake in the airport, which is

(00:34):
the second largest in the country, and the ACT Party
leader is saying today he doesn't think it should and
I agree. Remember seventy five percent as owned by the
christi At City Council and it's the other twenty five
percent that the ACT Party leader thinks should be sold
because he doesn't think governing an airport has core business
for the government. I think it's a great idea, but

(00:57):
not for exactly the same reason as David Seymour. He thinks,
you know, it's not part of what a government should
be doing, should be focused on government stuff. Now, I
don't care too much about that side of it because well,
for simple reason, the government or the Crown has its
fingers in all sorts of pies doesn't it. My support
for this comes down to numbers and the simple question

(01:20):
of whether you and I would be better off if
the government stayed involved in the Christich Airport Company or not.
So let me quote you a couple of things David
Seymour saying today. He says, quote act believes that owning
an airport isn't part of the government's core business and
would support selling it share so the money can be
used elsewhere better. He says, whether that means better infrastructure,

(01:45):
better healthcare, better education services, or homes for the next generation.
End of quote. Now. The reason I think this is
why I think this idea is a winner, has nothing
to do with me saying yeah, open the doors to
anyone with money. You know, it's not me agreeing with
Seymour that bents shouldn't be involved in things like airports.

(02:09):
Has got nothing to do with those things. And if
you're familiar with my views on assets, you might think
that this is a bit weird supporting Seymour on this one,
because generally I don't consider anything to be an asset
unless it's making money for you, and the airport is
making money. It's making money for the Crown and it's

(02:32):
making money for the majority owner, the Christiant City Council.
But if you dig a little deeper into the numbers,
that's where the argument in favor of the Crown selling
its twenty five percent share lies. It explains the numbers
explain why selling its twenty five percent share would be
a much better bet than holding on to it. So

(02:54):
here they are in the last twelve months, or in
the twelve months, should I say, until June last year,
the Airport Company reported an underlying net profit after tax
of forty one point eight million dollars and that was
from revenue in the twelve month period of two hundred
and thirty three million bucks, fifteen percent increase on the
year before. Great numbers, brilliant numbers. If we had twenty

(03:16):
five percent share of that, You'll be excited, wouldn't you.
And once I'd done things like take changes to depreciation rules,
et cetera into account, the actual result for the year
was twenty two point seven million dollars. Good numbers. You'd
be excited, wouldn't you have had shares than that? Lot?
Of course you would. Here are some more numbers though,
All up, the Airport Company is worth more than two

(03:38):
point three billion dollars billion two point three billion. So
if we do some really raw mathematics, they're the ones
that I'm the only ones I'm good at raw mathematics.
Let's say the crown's twenty five percent share in the
airport is worth five hundred and seventy five million million,
And if we tack the crowns twenty five percent share

(03:59):
of last year's actual profit, that comes to about five
point seven million. So what would you prefer? Would you
rather five point seven million dollars in a year or
five hundred and seventy five million dollars in a one
off transaction? And what I mean is, let's say five
point seven million dollars a year or five hundred and

(04:21):
seventy five in your lapse. Straight away, the crown could
sign a deal and get five hundred and seventy five
million dollars, or based on last year's profit level, it
could wait one hundred years to get the same level
of return one hundred years. And based on those numbers,
I think it's a no brainer. Based on those numbers,

(04:42):
I say, sell, Sell, Sell, And I don't expect to
be the only one thinking this is a good idea.
Just a few days ago, Mark Lister from Craig's Investment
Partners said that the City Council here mister Trackmanute decided
against asset sales because he reckons christ your chairport is
an attractive asset, which I'm sure it is, and all

(05:02):
the more reason for the government to try and sell
off its twenty five percent share. What's more, what if
it did sell, it wouldn't necessarily be to some foreign investors.
That's because Nightaho would have first right of refusal. So
if the Crown did decide to sell its shares to
pay for other stuff, then Nightaho would have first DIBs.
And if Nightaho did take up the offer, then win, win, win,

(05:23):
because that would at least mean the profits would be
staying in the South Island as opposed to going anywhere else.
And in the meantime, the government would be better off
to the tune of five hundred and seventy five million
dollars money it would otherwise money it would otherwise have
to wait one hundred years to make if it stuck
with its twenty five percent.

Speaker 1 (05:43):
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