Wellington Airport runway extension cost could blow out to $458m, says expert
The $300 million price-tag for Wellington Airport's runway extension could blow out to $458m, and may even soar as high as $507m, an independent expert says.
The much-vaunted $2.3 billion in economic benefits expected to flow from the extended runway may have also been overstated to the tune of almost $800m, according to a new council-commissioned report on the project.
But Wellington Airport hotly disputes the latest findings and is confident the runway extension can be built for $343m once air-bridges and associated infrastructure have been factored in.
It claims the latest analysis lacks the robustness of earlier reports it commissioned.
* Runway extension still has a way to go before getting consent
* No 'Plan B' if $300m runway extension fails to fly
* What the experts had to say about the runway extension
* Airport 'gifts' $10,000 to home owners affected by runway extension
* Hundreds submit on application to extend runway
* Runway extension could pump $2b into the economy
Wellington's new mayor, Justin Lester, says that, if the construction cost was to blow out to $458m, it would prove fatal to the project.
The airport wants to extend its existing runway south into Lyall Bay by 354 metres to allow for direct long-haul flights to Asia and North America.
The latest construction cost estimates appear in a recently released assessment of the project by Gregory Akehurst, a consultant with 20 years' experience.
He was commissioned by Greater Wellington Regional Council to review the airport's supporting documents for the runway extension ahead of its resource consent hearing in the Environment Court next year.
His report is included within a wider assessment of the project that identifies numerous red flags such as uncertainty over whether it could stand up to a major earthquake.
A cost-benefit analysis by Sapere and an economic impact report by EY, commissioned by the airport and released in November, concluded the extension could pump $2.3b into the nation's coffers over 60 years, with potentially $1b of that going to Wellington.
But Akehurst said those reports were too heavily reliant on best-case scenarios panning out, and the cost overrun contingency built into construction price tag was "at the bottom end" for such a project.
He suggested a more realistic range for the construction cost was between $336m and $507m, with his calculations throwing out a final figure of $458m.
"In my view, this adjusted figure provides a more realistic view of the costs of the runway."
Akehurst believed the Sapere report over-estimated the monetary value of the time savings travellers would enjoy by not having to travel to Auckland or Christchurch before flying long-haul.
He also suggested it was too difficult to truly say where the costs and benefits of the extended runway would fall, given we do not yet know how much money Wellington's ratepayers, the nation's taxpayers and the airport's majority shareholder Infratil are going to contribute.
He concluded the purported $2.3b economic benefit would be closer to $1.5b, while the estimated $1b benefit to the Wellington region would be more like $465m.
But he acknowledged that, either way, the runway extension still returned a "significantly positive" benefit.
Airport spokesman Greg Thomas said the $300m construction cost was calculated by international engineers with direct experience in reclamations, and had been risk-adjusted based on a "high scenario" of 110 per cent of market rates.
Akehurst had "ignored" the airport's original "conservative" costing, which was why his construction cost estimate was so high, Thomas said.
"The assessment by the council reviewer was not based on a best-practice engineering analysis, but instead a paper-based exercise, and we stand by our robust risk-adjusted calculations."
The runway extension would be subject to a comprehensive tender process, which would ensure the most competitive price possible, Thomas said.
Lester said the final business case for the extension would need to stack up, and some level of taxpayer funding would need to be secured, before any ratepayer money was committed.
Akehurst's was only one assessment, and needed to be scrutinised alongside other reports, he said. It was too early to make a final call on the merits of the project.
But he acknowledged that any "significant" cost blowout would be a concern to the council. "If the cost was $458m, it's highly unlikely the project would proceed."
RISING COSTS 'NOT A SURPRISE'
John Beckett, executive director of the Board of Airline Representatives (Barnz), a lobby group that represents major airlines that fly in New Zealand, said he was not surprised by the inflated costs in the council review.
Barnz had always felt the predicted increase in passenger numbers, which the economic benefits were based on, had been "staggeringly overstated." he said.
This latest report added weight to airlines' concerns that the cost of the runway extension would lead to increased landing fees, which in turn, could be added to the cost of air fares.
"We could end up with this investment being a big, white elephant," Beckett said.
Richard Randerson, co-chairman of anti-extension group Guardians of the Bays, said the latest cost estimate was no surprise, but the fact it had taken so long to appear in an official report was surprising.
The $300m quote had been thrown around for years without being adjusted, despite earlier plans to extend the runway north being significantly different to what was now on the table, he said.
"We're very grateful that someone has, at last, sat down and done some clear thinking on this."