“The lift in capacity, particularly on North American routes with a 48% increase in available seats, has not only benefited Kiwis but led to a 40% growth in North American visitors – an important economic driver for New Zealand’s tourism industry.”
In total 27 airlines flew non-stop between Auckland and 42 international destinations, up from 25 airlines and 40 destinations in FY23.
Where there is less capacity and competition, airfares were “stubbornly high”, most noticeably across the Tasman.
Strange said the higher cost of flying coupled with increased competition from other tourism destinations and the global economic climate caused flow-on impacts for key inbound visitor markets.
This was especially true for Australia, with fewer Australians choosing New Zealand as their destination.
“Looking ahead, a global backlog of replacement aircraft orders has seen airlines prioritising available fleet on high-yield routes and holding back on a full return to long-haul destinations,” Strange said.
“With these headwinds, we are anticipating a longer timeframe for achieving a full capacity recovery to pre-2019 levels.”
Chief executive Carrie Hurihanganui said Auckland Airport was taking a careful approach to managing costs due to the current economic environment.
“This conscientious approach to cost control extends to our infrastructure programme, with a firm focus on functional, fit-for-purpose facilities delivered in an efficient and cost-effective manner.”
Close to $4b in infrastructure work was under way and the first stage of the Transport Hub was completed along with closure of the inner terminal road.
The new domestic terminal is more than 20% complete.
The external structure of a major building block known as ‘the Stitch’ – the new connection point between the international terminal and new domestic jet terminal – is almost complete, with the baggage hall on the ground floor operating.
Hurihanganui said the recent release of the Commerce Commission’s draft conclusions on pricing confirmed Auckland Airport’s infrastructure programme was on the right track.
The Commerce Commission last month said the airport’s revenue and targeted returns were excessive but its planned investment appeared appropriate.
“We welcomed the commission’s draft conclusion that Auckland Airport had carried out extensive consultation with airlines and the rigour applied to planning and costing the investment, which benchmarked well internationally,” Hurihanganui said.
The commission said the five-year pricing path was unreasonable and the airport was on track for an excess profit of $200m.
“Some price increases are necessary to fund the investment needed to improve customer experience, build more resilient infrastructure and add additional capacity,” commissioner Vhari McWha said.
Hurihanganui today said the commission questioned the weighted average cost of capital Auckland Airport used to set prices, suggesting a lower value might be appropriate.
In particular, the commission shared a different interpretation regarding how the effects of the pandemic should be considered.
“We are committed to fully engaging with the next round of submissions on the commission’s draft report, including providing further context on how we considered the impact of the pandemic.
“This is the robust regulatory regime at work, one that balances the needs of travellers with the level of investment needed to maintain a well-functioning airport.”
Hurihanganui said the airport still had interest from new and existing international airlines in providing additional capacity into New Zealand.
“While New Zealand remains an attractive market for international airlines, uncertainty remains around external factors that are constraining the supply of aircraft and engines globally.
“Air New Zealand’s aircraft engine issues will also have an ongoing impact and we continue to face headwinds in the local economy.”
The company was cautious about the outlook for the next financial year.
Underlying earnings guidance was for between $280m and $320m reflecting anticipated domestic and international passenger numbers of about 8.6 million and 10.5 million respectively.
Capital expenditure guidance was between $1b to $1.3b in the year reflecting major investment across the airport precinct, including terminal integration.
Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.
