Airport told to reinstate dividend
Palmerston North Airport’s challenges to recover from the Covid-19 pandemic’s devastation of passenger numbers while planning an ambitious investment programme could be compounded by the desire of some city councillors to get dividend payments back.
The full Palmerston North City Council this week approved its statement of expectation to the airport company, including a request that dividend payments be reinstated within the next two years.
Before the pandemic, the dividend paid to the airport’s sole shareholder, the city council, was in the region of $685,000.
The council had agreed not to receive dividends after passenger numbers slumped, and the company embarked on plans to upgrade the terminal building and develop its business park.
Councillors Karen Naylor and newly elected William Wood led the charge to ask for the return of cash dividends within the next two years.
The airport company indicated dividends would not be reinstated for at least three years.
Naylor said that while forgoing the dividend was appropriate in the acute phase of Covid-19, passenger numbers were now recovering.
She wanted to explore whether it was possible for the company to resume paying an amount that relieved pressure on ratepayers.
Presenting the airport company’s annual report for the 2021-22 financial year, chief executive David Lanham said passenger numbers dropped to a 20-year low of 323,615, a ‘‘very disappointing’’ total.
So far this financial year, passenger numbers had recovered to about 45,000 a month, on track to 500,000 for the year and then to pre-Covid levels by 2025.
Looking ahead, the company planned to spend $80 million on capital projects in the next four years. That was likely to include $38m on customer facilities, including the terminal building redevelopment, and $35m on commercial developments.
The terminal building would enable the airport to gear up for the probable future requirement for passengers and their luggage to go through security, and the possible return of jet services.
The commercial spending on the business park would involve building facilities that would be leased out to diversify the company’s income stream.
The council recently agreed to provide the airport with access to $50m of borrowing at the lower interest rates offered through the
Local Government Funding Agency. However, council finance strategy manager Steve Paterson said the airport company would still have a lot of challenges in funding its capital expenditure plans.
He said it was his opinion that any suggestions of the company paying dividends to the council in the short term were unrealistic.
The alternative was that the company would be asking the council to put more capital into the airport, which it had not budgeted for.
Wood questioned whether the airport company should be making huge investments if it could not afford to pay a dividend.
Councillor Lorna Johnson said it was time the council provided a bit of pushback against the airport company. She said while the company was increasing the value of airport assets, the council was missing out on payments that it could use to reduce demands on rates.
With ratepayers hurting to keep up with cost-of-living increases, providing them with some relief was more important than building equity in the airport, she said.
Palmerston North Airport would have an opportunity early next year to convince councillors of the need to keep investing the dividend back into the company, she said.
Palmerston North mayor Grant Smith said the airport was a strategic partner providing a critical gateway to the region.
He said it was part of the city’s distribution centre plans and should not be hamstrung by city council demands to resume paying dividends in the midst of significant development plans.
The vote calling for a dividend return was 12 for and four against.
Those opposed were the mayor, deputy mayor Debi Marshall-Lobb, and councillors Vaughan Dennison and Leonie Hapeta.