The Invercargill City Council holding company has ploughed $3 million into "routine" maintenance for the city airport, in the process taking almost complete control of it.
Invercargill City Holdings (Holdco) announced it had bought $3m worth of shares in the airport yesterday.
The airport had offered $3m of shares to both Holdco and the Crown, its two existing shareholders, so it could afford maintenance work on its taxiway and apron.
The Crown declined to invest, saying it was under capital restraint.
Holdco's $3m buy was unanimously approved by the council during the public-excluded session at the full council meeting on December 11.
Holdco now owns 97.19 per cent compared to its 55 per cent stake before the buy.
The Crown's share has been diluted from 45 per cent to 2.81 per cent.
The airport made a profit of just $3274 in 2010-2011.
Holdco deputy chairman Cam McCulloch said the airport did not have the resources to do the work without capital investment.
It may have to raise its landing fees, the main source of its profits, in order to boost its operational funds, he said.
"[The fees] might not have been sufficient and may need to go up in the future."
Mr McCulloch said the $3m investment would not have an affect on Holdco's annual dividend to the council, which was forecast to be $3.7m this financial year.
"It is not going to affect the return. It doesn't come out of the [Holdco] profit . . . it will reduce the income in the short term but it does not affect the projected dividend."
Airport company chairman Joe O'Connell denied it was effectively a $3m bailout from the council.
He said council investment was positive and showed its commitment to infrastructure.
"What this is about is supporting a very important infrastructure asset . . . you can view it as no different to water or sewerage or roading."
The landing fees were going to have to increase to support the infrastructure the airport needed, he said.
"The reality is these airports aren't cheap to run."
Asked if the airport could get private investment, he said it would be difficult.
"It's a not a particularly attractive business proposition . . . [regional airports are] a very challenging business to be in but very important for all regions."
- © Fairfax NZ News
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