John MacDonald: What should the Crown do with its Christchurch airport shares?

After all his talk about asset sales, David Seymour has obviously been scratching his head like the rest of us, wondering what we’ve actually got left to sell. And he’s got Christchurch Airport in his sights.   The Government —or the Crown— owns a 25% stake in the airport (which is the second largest in the country) and the ACT Party leader is saying today that he doesn’t think it should. And I agree.   Remember, 75% is owned by the Christchurch City Council, and it’s the other 25% that Seymour thinks should be sold because he doesn't think owning an airport is core business for the Government.   I think it’s a great idea, but not for exactly the same reason as David Seymour.    He thinks an airport shouldn’t be a government activity. I don't care too much about that side of it, because the Government —or the Crown— has its fingers in all sorts of pies, doesn’t it?   My support for this comes down to numbers. And whether you and I would be better off if the Government stayed involved in the airport company or not.    So David Seymour is saying today: “ACT believes that owning an airport isn’t part of the Government’s core business and would support selling its share so the money can better be used elsewhere.”   He says: “Whether that means better infrastructure, better healthcare, better education services or homes for the next generation.”   And the reason I think this idea is a winner has nothing to do with me saying “yeah open the doors to anyone with money”. It’s not me agreeing with Seymour that governments shouldn't be involved in things like airports.   It’s got nothing to do with those things.   And if you’re familiar with my views on assets, you might think it’s a bit weird that I’m supporting Seymour on this one. Because, generally, I don’t consider anything to be an asset unless it’s making money - and the airport is making money.    It’s making money for the Crown and it’s making money for its majority owner, the city council.   But if you dig a little deeper into the numbers - that’s where the argument in favour of the crown selling its 25% share lies.   In the 12 months until June last year, the airport company reported an underlying net profit after tax of $41.8 million. That was from revenue in the 12-month period of $233.1 million - a 15% increase on the year before.   And, once they’d done things like taking into account changes to depreciation rules, the actual result for the year was $22.7 million.   Here are some more numbers:  All up, the airport company is worth more than $2.3 billion.   So, if we do some really raw mathematics, let’s say the crown’s 25% share is worth $575 million.   And if we take the crown’s 25% share of last year’s actual profit, that comes to about $5.7 million.   So, what would you prefer? $5.7 million in a year or $575 million in a one-off transaction?   The Crown could sign a deal and get $575 million. Or, based on last year’s profit level, it could wait 100 years to get the same sort of return.   Based on those numbers, I think it’s a no-brainer. And I don't expect to be the only one thinking this is a good idea.   Just a few days ago, Mark Lister from Craigs Investment Partners said Christchurch City Council missed a trick when it decided against asset sales. He reckons Christchurch Airport is an attractive asset, which is all the more reason for the Crown to sell-off its 25% share.  See omnystudio.com/listener for privacy information.