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Auckland Airport to cut fees in response to ComCom critique; profit falls

Friday 22nd February 2019

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Auckland International Airport will cut fees for airlines in response to criticism the planned hikes to cover the cost of a $1.8 billion infrastructure spend weren't justified. 

The airport operator made the announcement while reporting an 11 percent decline in first-half profit, due largely to a smaller property valuation gain than a year earlier. Underlying earnings edged up in line with expectations. 

Auckland Airport has reduced its target return on regulated assets to 6.62 percent from 6.99 percent for the next five-year pricing period, cutting the fees it will charge airlines by $33 million, or 31 cents a passenger. The changes take effect from July and will run until June 2022. 

As part of its semi-regular airport pricing review, the Commerce Commission said the airport's targeted returns were too high, even with the planned upgrade. 

"Estimating a target return is not an exact science and while the Commission acknowledged that the airport could justify a slightly higher return than its benchmark, we reached different views on what was justified," chief executive Adrian Littlewood said today. "We have listened to their feedback and believe this is reflected in the reduced charges to airlines."

Auckland Airport reported a net profit of $147.2 million in the six months ended Dec. 31, from $165.9 million. That included a smaller property valuation gain of $11.1 million in the latest period, compared to a $41.5 million increase a year earlier. 

Underlying earnings increased 2.9 percent to $136.9 million, slightly ahead of Forsyth Barr's estimate for $131.1 million and a touch below First NZ Capital's forecast of $137.7 million. 

The airport affirmed guidance for annual underlying earnings of $265-275 million, reflecting lower regulated pricing and higher interest and depreciation from the infrastructure spending. 

Auckland Airport lowered its capital expenditure forecast for the year to $280-330 million from a previous estimate of $450-550 million, as it changed the timing of some anchor projects in the upgrade.

The board declared an interim dividend of 11 cents per share, payable on April 5 with a March 22 record date. That's up from 10.75 cents a year earlier. 

The shares last traded at $7.35, and have gained 15 percent so far this year. 


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