Airport result reflects tourism strength

By Phil Boeyen, ShareChat Business News Editor

Thursday 30th August 2001

Increasing passenger levels and higher retail revenues have boosted Auckland International Airport's (NZSE: AIA) profit by nearly 16%.

The airport has recorded a bottom line surplus of $59.1 million for the year ended June, up 15.8% from last year's $51.05 million.

International passenger movements are up by 5% while domestic passengers grew 5.5% year on year.

Retail revenue continues to provide a strong income stream, increasing 11.8% compared with last year to $56.61 million. Total revenue rose 11.4% to $189.3 million.

Operating costs also grew for the year, rising 8.7% to $50.25 million. The airport says around $1.6 million of that is for costs associated with the extended pricing consultation process and the yet-to-be-completed Commerce Commission inquiry into airfield pricing.

The Commission has suggested price controls be placed on the company's airfield operations but the company is lobbying against such controls.

"It is acknowledged by the company that airfield activities - presently 27% of revenue - are supplied in a market where competition is limited," the company says.

"The current light-handed regulations are designed to ensure that the major airport companies do not abuse their market power."

Earnings before interest, tax and depreciation rose 12.4% to $139.1 million and Ebitda margin improved to 73.5%.

The airport's property portfolio increased in value to $81.2 million but there were a further three projects under construction at the year's end which the company says will bring the value up to around $90 million.

AIA has released its first set of disclosure statements in accordance with the Airport Authorities' regulations.

The statements relate to airport activities, aircraft and freight activities and specified terminal activities for the year to June 2000.

These show that for that period the company's airfield activities brought in $44.95 million with profit after tax of $13.58 million, with return on assets employed of 4.3%. The return on terminal activities was 1% with tax paid profit of $2.09 million, and aircraft and freight returned 5.6% on assets employed.

AIA says compared to the relevant weighted average cost of capital for the activities, which is in the range of 8.5% to 9.4%, the returns aren't excessive.

"These return levels, together with the impact of the associated significant capital expenditure programmed over five years, necessitated the company seeking increases in both landing charges and terminal charges."

The disclosure statements to the end of June 2001 will be released in November.

Last year the airport set new landing charges which Air New Zealand, the company's largest airline customer, has refused to pay.

A court hearing over the matter is set down for February next year and the company says costs incurred during the year in respect of the consultation process and for the court hearing have amounted to around $1 million.

Although Air NZ has not fronted up with the cash, the airport has included the $1.5 million it owes in revenue, showing its confidence in winning next year's court battle.

The airport has announced a final dividend of 6.25 cents per share, representing 80% of the surplus after tax, and says the outlook for the current financial year is positive, with tourism numbers set to grow further.

"Such growth continues to provide real opportunities for the company, and the ability to move quickly and decisively to accommodate market requirements - whether in property investment, retail or infrastructure developments - is now well accepted.

"It therefore remains reasonable to anticipate that we can expect ongoing improvements in our key activity levels and financial performance again next year."

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