AIAL: Access Denied!

The government has blocked the sale of 40% of Auckland International Airport (AIAL) to the Canada Pension plan as it does not pass the test of “benefiting New Zealand”.

it’s a good thing those money hungry Canadians aren’t going to bleed the economy dry by taking control of a “strategic” asset.

On a serious note, I still don’t see what the issue is. We’ve discussed this previously here and I don’t feel the need to repeat the arguments we made. It’s not like they can take they airport and move it somewhere else. If they run the airport down like everyone is worried about then travelers can bypass New Zealand and go to Australia. If this happens the airport loses money so why would they do it?  People will point to the railways and the our phone infrastructure as examples of strategic assets that were run down and use this as an argument that the same thing will happen to AIAL. They key thing that people ignore here is that back in the day there weren’t many close substitutes for the railway and phone communications. Therefore a firm could profitably cut expenditure and reduce quality since there weren’t many credible substitutes (i.e they wouldn’t lose customers).

Ultimately I can’t help but feel this is the political decision of a government that is scared of being associated with “asset sales” coming into an election year, rather than a decision that has been based on any sound economic reasoning.

It’s been a while since I’ve posted,have you missed my sarcasm?


5 replies
  1. goonix
    goonix says:

    I’ve missed your sarcasm like a Labour government misses a strategic asset.

  2. Andrew
    Andrew says:

    Canadian here, eh.

    Having flown through Auckland about eight years ago, I don’t really remember the airport, but I do agree with the politically-driven decision hypothesis.

    It’s not like our pension fund can physically remove the assets to Toronto in times of crisis or whatnot, and they’re certainly profit-maximizers.

    The shares were way down on the news (40% or something?), and I suspect that Kiwis hold the majority of them, directly or indirectly. That’s gotta be something.

  3. Ged
    Ged says:

    The deal would have left the airport over 80% debt funded, with around half owned by non-NZers and a big chunk by tax exempt local authorities. The non-residents would have paid 2% tax, the tax exempts no tax. Tax on the airport’s profits is needed to fund sensible cuts in tax rate cuts. No, the stapled security deal would not have changed the debt ratio – notice how the pension fund barely batted an eyelid when the government announced its stapled stock policy.

    The right result for the wrong reason – an incoherent policy on foreign ownership of strategic assets.

Trackbacks & Pingbacks

  1. […] you probably worked out from my previous rants I disagreed with the decision to block AIAL (here and here) and found it inconsistent with the decision to allow the sale of vector’s […]

  2. […] notice that in my post on AIAL one of my main points was that if the airport was “run down” to save money as greedy […]

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