Infratil payment causes airport profit variation
Wellington Airport's reported $23.5 million profit for the year ended March 31 is at odds with parent company Infratil's annual report, which says the airport made a $39m profit.
The discrepancy arises because the airport treats writing a cheque for a "subvention payment" in lieu of a dividend to Infratil, which owns 66 per cent of the airport, as operating and other expenses.
Don Trow, emeritus professor of accounting at Victoria University, said this accountancy technique kept the payment out of the net-profit-after-tax column. There was not a uniform way for a subvention payment to appear in accounts, he said, but the way the airport dealt with it was outmoded.
Airport chairman Tim Brown said it was "normal accountancy" used for at least the past decade. It had been confirmed by KPMG, and reviewed and "passed" by the Financial Markets Authority.
Last year, Infratil recorded the airport posting a $39m profit when the airport's accounts reported a $16.2m profit.
Trow did not know why the airport would report a lesser profit than Infratil. "But it might have something to do with the fact that their [airport] profits are watched by the Commerce Commission."
The airport was investigated by the Commerce Commission on whether it was making excessive profits through its aeronautical assets - but not on things like car parking. "The commission claimed the airport had valued its land too highly, which allowed it to gouge bigger profits."
A High Court decision largely confirmed the framework used by the commission but it recommended the commission use the 2010 valuations, not the 2009 valuations that were used.
Brown said the commission only looked at certain specified revenues and costs, and it looked at returns before interest, dividends and subventions.
"[The commission] is only interested in returns on assets before payments to capital providers."
Brown said the airport should shortly conclude consultation with airlines over aeronautical charges, which on average should lower prices by about $1 per passenger. "Then they will rise over the . . . current pricing period so that by April 1, 2018, they will be about $2 higher."
March year profit:
Wellington Airport reported: $23.5m
Majority owner Infratil reported: $39m
Why the difference? A "subvention payment" to Infratil, which is like a dividend.
A dividend of $10.8m was paid to the Wellington City Council which owns 34 per cent of the airport.
Airport action: March year 4.6 million domestic passengers
753,000 international passengers
Aeronautical income: $68m