Cash-strapped city cracks whip at airport
Cash-challenged Hamilton City Council is putting the hard word on the airport to sharpen up on dividends and attracting international flights.
Annual dividends at the 50% council-owned Waikato Regional Airport Limited (WRAL) have been flat at $500,000 since being re-introduced after Covid-19 eased.
That’s previously prompted calls for an increase as the council faces big financial headwinds.
WRAL, which has four other district councils owning shares, had shareholder equity of $234 million last June. It has a policy that future dividends will be paid from free cashflow. No set amount is indicated.
Its draft statement of intent for next year only says “directors will review the performance and outlook for the group annually in accordance with the group’s dividend policy before declaring any dividends”.
But, at yesterday’s economic development committee hui, councillors unanimously approved a motion calling for the company to improve its stance on dividends.
They also wanted better wording over airport efforts to attract international flights – there have been no scheduled passenger flights from abroad into Hamilton since around 2012, said committee chairperson Ewan Wilson.
Afterwards, he told the Waikato Times that he was concerned a lack of border agency facilities at the airport meant it hadn’t been able to quickly respond to recent trans-Tasman interest in renewing international flights.
Mayor Paula Southgate and chief executive Lance Vervoort were delegated to work with other shareholding councils on getting WRAL to improve its statement of intent.
Motion mover councillor Geoff Taylor, who was seconded by Southgate, said the draft statement’s wording on dividends was “a bit underdone” on dividends and flights “given what we were hoping for in our letter of expectation” to WRAL.
He suggested that, given low airport debt, borrowing for airport strategic purchases could be preferable to “gouging” free cashflow that could be used for dividends.
He asked what was stopping the airport from such borrowing so “loyal shareholders” got a decent dividend.
Airport finance and commercial general manager Scott Kendall told councillors: “We hope to be able to bring increasing dividends back to you.”
Board member Margaret Devlin stressed investments weren’t totally free cash funded but “cash is reality” and “it’s actually what we’ve got available to pay out dividends”.
She said “the world of corporate affairs is littered with organisations who have borrowed to pay dividends and then haven’t been able to have sustainable cashflow going forward”.
Challenged on this by Wilson, she said experience showed the long-term sustainability of borrowing to pay dividends “doesn’t actually end well for an entity”.
Devlin would welcome a combined stand from all shareholder councils on the issues.
Meanwhile, a WRAL report noted the “first credible engagement with international airlines in a decade” involving a possible new, scheduled trans-Tasman service.
Airport operations manager Ben Langley told councillors WRAL was working with state agencies on the idea of re-establishing border controls. A “best case scenario” was this could take a year but agencies would like two years.
Langley acknowledged the timeframes could constrain airlines wanting to make fast decisions. WRAL wanted to hasten progress and the Government had appointed a project manager.
Devlin said confidential discussions on accessing Hamilton were continuing and the company was close to securing a good outcome with one airline.
Taylor asked why, if Hamilton was an airport proactively seeking international opportunities, it was having to warn of a possible two-year delay.
Said Langley: “There hasn’t been a direct inquiry that’s required us to go through that process until these [latest inquiries].”
Devlin said airlines wanted surety on filling outbound as well as inbound flights.
Wilson understood WRAL’s recent focus on property development but said it looked like an international opportunity had been lost for now.