DECEMBER 2007 Wellington’s links with the world This Update looks at Wellington Airport’s work to encourage airlines to provide direct links with Asia and America, why airlines can now offer this service, and why the Wellington aviation market would support such a service. New Zealand has an unprecedented opportunity to grow air travel. For the country to maximise the value of this opportunity it must have the infrastructure, including airports. Gateways to New Zealand must avoid becoming bottlenecks. Auckland and Christchurch will benefit from increased Asia Pacific travel and central New Zealand must also be “open for business”. www.Infratil.com Air services matter Global Economic Activity (GEA) and world population within a 3.5 hour flying time PARIS CHICAGO 26% of world GEA 15% of world 32% of 25% of population HONG KONG world GEA world GEA 42% of world 7% of world population population WELLINGTON 1% of world GEA 0.4% of world population New Zealand is the furthest away place in the world. Draw a circle on a map to show 3.5 hours flying time from New Zealand and the circle captures 0.4% of the world’s population. The benefits and barriers of better connectivity are apparent from doing the same exercise centred on Hong Kong (42% of the world’s population and 32% of global economic activity), Paris (15% of the people, 26% of the economy) and Chicago (7% of the people and 25% of the world’s economy). A direct Wellington-Hong Kong air service would reduce travel time by at least three hours (six to seven if the service is via Sydney rather than Auckland). Studies have shown that more convenient, quicker travel makes an appreciable difference to demand, and reduces emissions. A link with Hong Kong is also a link with Europe. Even a tiny impact on people’s willingness to visit New Zealand, for business or pleasure, would be a major economic boon - not to mention providing Wellingtonians with the ability to see the Hong Kong Sevens without half a day in transit lounges. Wellington Airport’s investment in facilities Wellington Airport’s point to point plans for TOKYO long haul flights to Asia and America SAN FRANCISCO LOS ANGELES SHANGHAI HONG KONG BANGKOK SINGAPORE WELLINGTON TRAVELLERS WANT DIRECT SERVICES WELLINGTON AIRPORT INVESTING & AIRLINES WANT TO PROVIDE THEM IN FACILITIES & SERVICES Air travel is becoming more point to point, as opposed Since the Government sold its 66% stake in 1998, to flying to a hub and then on to a destination. Travellers Wellington Airport has markedly increased investment prefer the faster trip time and the reduced hassle. in facilities and services, in particular the new domestic Airlines prefer the cost savings, especially on fuel, which terminal, the upgrade to the international terminal means environmental benefit. (which has some way to go yet), and runway safety To quote Air New Zealand, “Point to point flying, rather enhancements. than hub and spoke flying … will enable airlines to The Airport also invests in improving and encouraging air conserve up to 25% of their fuel by reducing fuel- services. It partners with the city’s tourism organisation, intensive take offs and landings. These are strategies Positively Wellington Tourism, Air New Zealand, Qantas, we are pursuing.” and Pacific Blue to market Wellington as a destination. Studies indicate that leisure travellers are heavily From 2002 to 2007 it had a growth agreement with influenced by travel time. For a week’s holiday, over Air New Zealand which meant that the airline was not 90% of people are willing to travel four hours, but only charged by the airport for up to 20% of their passengers. about 40% are willing to spend eight hours travelling. Wellington Airport is now working to encourage airlines The same is true for business travel and many businesses to provide long haul services, in the first instance to choose their locations on the basis of ease of provide a link between Wellington and Europe via Asia. communication and travel. Wellington’s high reliance on service sector employment (government, banking, finance, design, entertainment, etc.) makes good transport links necessary. Infratil UPDATE 2 Issue 26 3 Airports generate economic benefits for their Regional benefits surrounding communities. Businesses locate nearby to take advantage of the access to inbound business, so as to be able to send their employees to visit customers, suppliers, and other offices, and to be accessible to incoming business advisers and contacts. Wellington has a particularly successful and proactive tourism organisation, Positively Wellington Tourism, which is partnering with the Airport to market direct air links with Asia and working with local hotels and attractions to develop services and activities for visitors. Tourism is a significant beneficiary of good connectivity and a significant source of regional income and wealth. The Wellington economy gained $536 million last year from international visitor spend. CHINA’S LITTLE EGRET DANCE COMPANY © Photo by Robert Catto / www.catto.co.nz Unlike other areas in New Zealand where many of the Infrastructure – transport links – economic benefits – attractions are natural, Wellington’s tourism industry cultural/sport events are inextricably linked. Each link of is based on man-made draws such as Te Papa, Karori the chain can be either a stimulant or an impediment. Sanctuary, as well as arts, sport, cultural and culinary Inbound tourism to New Zealand tends to cover the activities. 25,000 people are drawn to Wellington for the area from Auckland to Rotorua and Christchurch to NZI Sevens, spending $9 million over the three days. The Queenstown. Opening Wellington as a gateway not only International Arts Festival is worth $34 million over three opens central New Zealand to the economic benefits weeks. The Wellington Phoenix v LA Galaxy Game of sustainable tourism, it spreads the tourists and is estimated to have contributed $8 million to the avoids bottlenecks. New Zealand economy. The focus for short-stay Australian visitors is two to In addition to the economic value, Wellingtonians get the four days of intensive activities involving mainly the benefit of being able to attend world class events on immediate region, perhaps going as far afield as Kaikoura their doorstep. As demonstrated by the move of WOW to whale watch or Martinborough to play golf and do a from Nelson to Wellington or the Ellerslie Flower Show wine tour. from Auckland to Christchurch, such events need to be able to generate economic value and have compatible A tourist from Hong Kong may be looking at a six to nine local infrastructure. day stay and hence will need a wider schedule. It will not just be a case of more people doing the same things. The economy of central New Zealand, business and tourism, will benefit from direct air services to Asia and better on links to Europe. Infratil UPDATE 4 Issue 26 5 1959 - 1997 24 October 1959 - Wellington Airport was opened by runway than Wellington’s. Wellington maintained its Governor General Lord Cobham (“another link binding the importance for the domestic market but international Commonwealth”), Prime Minister Walter Nash (“earthworks growth was increasingly captured by Auckland and unparalleled in our country”), Leader of the Opposition Christchurch, along with the associated economic activity. Keith Holyoake (“Wellington Airport … wrested from the In 1972, the runway was lengthened by 300 metres, but the hills and the sea”) and Mayor Frank Kitts (“the greatest cost of extending to allow long haul aircraft was probably municipal undertaking ever attempted and carried through not justified by demand and the then owners were unwilling in New Zealand”). It was the culmination of a campaign or unable to take the financial risk. started in 1929 by the Wellington Chamber of Commerce which wanted the capital to have its airport closer than Paraparaumu. Passengers 1959-1997 4.5 The Airport was built on land formed by the most extensive International 3.5 civil works undertaken in New Zealand. A hill was removed Domestic (along with 180 houses and three factories), the south 3.0 coast seawall was built, and there was substantial 2.5 reclamation, including the land along what is now 2.0 (Millions) Cobham Drive. 1.5 From its opening until 1990, the Airport was run as a 1.0 department of the City Council. In 1968 it was .5 New Zealand’s busiest, but Auckland and Christchurch then grew more rapidly because aircraft carrying enough fuel ‘59 ‘61 ‘63 ‘65 ‘67 ‘69 ‘71 ‘73 ‘75 ‘77 ‘79 ‘81 ‘83 ‘85 ‘87 ‘89 ‘91 ‘93 ‘95 ‘97 to go further than east coast Australia needed a longer 1997 - 2007 Wellington Airport took a low key approach to In 2002 (three years after the new terminal’s opening) improvements in facilities and services between its airline charges were increased by $4 per passenger to opening and 1997. The main terminal continued to be pay for the facility. Wellingtonians were enthusiastic the converted factory even though a new facility was about the improvement and a poll undertaken showed announced in 1981. 97% of respondents were happy to pay the extra for Since the Crown’s sale in 1998, Wellington Airport has the facility. invested $191 million in facilities and services, and current projects will take this to over $250 million by 2009. Passengers 1997-2007 5 The investment has resulted in some criticism. Incumbent International airlines tend to argue for a single-minded focus on cost Domestic 4 minimisation and have concerns that expanded facilities open the gate for airlines to enter the market to provide 3 competition. (Millions) One reason the new terminal took until 1999 was because 2 the status quo made it difficult to attract new airlines.