Newcastle Airport Refutes Claims of Financial Crisis Amid Expansion Projects

30 October 2024

Newcastle Airport has strongly denied reports suggesting it is facing a financial crisis, asserting its financial health remains robust despite challenges associated with significant expansion projects. The rebuttal comes after the Newcastle Herald published an article claiming the airport is grappling with cost blowouts, declining passenger numbers, and unbudgeted expenditures linked to major defence projects.

The Newcastle Herald alleged that Newcastle Airport is experiencing financial strain due to overruns on its $110 million international terminal expansion, which has reportedly escalated to $157 million. The article also cited falling passenger numbers following the withdrawal of airline Bonza and unbudgeted planning costs amounting to $1.7 million for the Kongsberg missile factory and Lockheed Martin Air 6500 project. Additionally, it mentioned $5.9 million spent on subdivision costs for the Astra Aerolab defence and aerospace precinct, expenses not yet eligible for bank funding.

Documents seen by the Herald revealed that the airport’s cash reserves are depleting as costs increase and funding options dwindle. The article referenced solvency resolutions passed at recent board meetings of the Greater Newcastle Aerotropolis (GNAPL), suggesting these indicate a precarious financial position with an insolvency risk due to unbudgeted expenditures.

Furthermore, the Herald raised concerns about the airport’s governance structure, highlighting that the mayors and general managers of Newcastle and Port Stephens councils serve on the airport’s boards. The report suggested this arrangement could present conflicts of interest, particularly as the councils are joint owners of the airport. It also noted that the airport has not paid a dividend in four years and scrutinised increases in directors’ fees, which have reportedly risen by 60 per cent in the past five years to nearly $80,000 each per year for certain board members.

In response, Newcastle Airport issued a media release on 29 October 2024, with CEO Peter Cock and Chair Jude Munro AO addressing the claims made in the Herald article. Peter Cock, disappointed over what he described as “factual misrepresentations” and the lack of opportunity provided by the Herald to verify or contextualise the information before publication.

“I would like to address and dispel recent media reports from the Newcastle Herald suggesting that Newcastle Airport is facing financial difficulties,” Mr Cock stated. “We adhere to best practice guidelines, and as part of our standard operational procedures, we provide monthly financial reporting to the Board. Misrepresenting an internal, confidential board paper does not accurately reflect the financial health of Newcastle Airport. We stringently report on potential risks, but our financial status remains robust, with a healthy working capital.”

Mr Cock acknowledged that cost and supply chain challenges are being felt globally, noting these issues are not unique to Newcastle Airport. He emphasised that the airport is undergoing a “once-in-a-generation terminal expansion” set to open on 1 August 2025, and that regular financial forecasting and analysis by experienced directors are part of prudent management practices.

Chair Jude Munro AO echoed these sentiments, expressing disappointment that the airport’s commitment to good governance and risk management was misrepresented. “Our Board of Directors, known for their experience and expertise, passed a resolution and directed the Airport leadership team for prudent management to maintain cash reserves,” Ms Munro said. “This decision aligns with our best practice standards as a skills-based and risk-averse Board.”

Ms Munro defended the integrity and qualifications of the Board, stating that during times of extraordinary company growth, it is normal and prudent to prioritise company expenditures. “Our Board of Directors and Airport leadership team are aligned and have been working closely together with full financial transparency,” she added. “I stand firmly behind the qualifications and recommendations of our Board and I cannot stand by and allow their integrity to be questioned.”

The airport’s management explained that solvency resolutions are a regular part of standard operational procedures and risk management, ensuring that the company maintains appropriate cash reserves. They refuted the interpretation that these resolutions signal financial distress or an insolvency risk.

The Herald also reported concerns from Newcastle Lord Mayor Ross Kerridge, who said that the reports of financial issues were “of great concern” and that he would be “taking steps to gather more information.” Additionally, the article mentioned that a report was to be presented at a council meeting recommending former Lord Mayor Nuatali Nelmes and CEO Jeremy Bath retain their positions on the airport boards on an “interim” basis, a motion carried 10 votes to 2 at Tuesday night’s council meeting.

The Herald also highlighted issues regarding the remuneration of board members, noting that Ms Nelmes and Mr Bath’s fees for their roles on the airport boards have increased significantly. The article questioned the transparency of these arrangements, pointing out that while the airport is jointly owned by the councils, the directors themselves approve the board fees.

In an unrelated development, CEO Peter Cock announced his resignation after nearly ten years at the helm of Newcastle Airport, planning a move back to Western Australia. The timing of his departure amid the financial scrutiny has drawn attention, although no direct connection has been established between his resignation and the financial claims made by the Herald.

The airport’s management remains focused on its expansion plans, which include the terminal upgrade intended to more than double its size and accommodate larger, long-haul aircraft. This expansion is part of a strategic initiative to attract international carriers and boost the region’s connectivity. The airport is also investing in the Astra Aerolab precinct, aiming to enhance the region’s defence and aerospace industries, despite the unbudgeted costs currently associated with these projects.

Cost management remains a critical focus for the airport’s leadership. Documents referenced by the Herald indicated that measures have been taken to contain forecast cash expenditure, such as deferring non-critical capital projects and staging the delivery of the apron project. The airport acknowledges that while these steps are necessary during significant growth phases, they are part of normal business operations and not indicative of financial instability.

The contrasting narratives between the Newcastle Herald and Newcastle Airport highlight a complex situation involving large-scale capital projects, financial management during periods of expansion, and governance practices. While the Herald suggests that the airport is facing significant financial challenges that could pose an insolvency risk, the airport’s leadership asserts that it is managing these challenges effectively through prudent financial practices and robust governance structures.