Benefits of Wellington airport extension overstated

Review shows economic benefits of Wellington airport extension substantially overstated

A review of the Wellington airport extension cost benefit analysis shows that the net economic benefits of $2090 million have been substantially overstated.

The Tailrisk Economics review found that the high benefit estimate relied on projections of long haul passenger numbers that are not credible, and favorable assumptions that boost the subsequent benefits for New Zealand.

In critical markets recent high economic growth rates have been trended forward without regard to convergence to higher income country norms, and no regard has been given to the prospect of global warming policy initiatives designed to slow air traffic growth.

“A more realistic assessment of the project would show much lower and possibly negative net benefits” said Ian Harrison Principal of Tailrisk Economics.

One of the purposes of the cost benefit report is to make a case for central and local funding of the airport extension. If the airport is as successful in attracting long-haul flights as is claimed, then the extension will be a commercially viable investment. There is no need for a government or local authority subsidy.

“Wellington wants to promote itself as smart and green. If it subsidises what may be a non-viable commercial investment, or unnecessarily subsidises a viable one, it will be neither smart nor green” Harrison said.

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