Airport boost stirs fears of higher charges

The airport says new prices taking in the revised $2.7 billion valuation are expected to be set by September next year.

The doubling in value of Auckland International Airport's assets to $2.7 billion is prompting airline fears that it will raise landing and passenger charges.

AIA has revalued its non-current assets by $1.4 billion (as at June 30) from a previous book value of $1.3 billion - although about half the increase is due to a change in accounting methodology.

The Board of Airline Representatives said yesterday that there was a "high degree of angst" among airlines about the impact the revaluation could have on charges.

It said some airport companies had previously passed revaluation increases directly on without properly accounting for the revaluation gains as income.

Executive director Stewart Milne said the airport's aeronautical asset base had risen by more than $300 million.

"Under that approach previously taken by airports, a $300 million revaluation would result in airlines and passengers paying an airport more than $38 million per annum extra in charges for the use of the same assets," he said.

However, AIA chief financial officer Robert Sinclair said "no particular conclusions at this stage should be drawn from this announcement" as the new valuations were only one factor - albeit an important one - in a pricing consultation process.

This consultation has been under way for about 18 months and could take up to another year to complete before new prices are set on September 1 next year.

Of the total $1.4 billion gain in asset value, the airport's land - including airfield, terminal retail and car parking - had increased by $1.2 billion.

The value of buildings and services was up $75.5 million, runways, taxiways and aprons were up $73.9 million and infrastructure was up $48.6 million.

An investment property portfolio of 46 sites, rented by companies including freight forwarders and logistics operations, which was valued annually, was up $13.6 million.

Goldman Sachs JBWere aviation analyst Peter Sigley said the scale of the overall revaluation was greater than expected but was, in part, associated with the adoption of new accounting principles "and in particular the valuation of the retail assets which weren't really previously captured".

The valuation of retail space within the terminal used a discounted cashflow method not previously used for this category. The result was $709.8 million compared with the current book value of $463,983.

He said the asset revaluation made a big difference to the book value but not to the cashflow or underlying fundamentals of the business. "So [it's] largely regarded as an accounting issue as opposed to one of valuation."

Sinclair said the method had been confirmed with auditors and was consistent with the previous valuation of car-parking assets.

Property, plant and equipment was last revalued in 2002 and under financial reporting standards had required revaluation within the next year.

The new valuations better reflected the market value of the company.

AIA's share price slipped 2c to end the day at $2.11 yesterday.