Airport pulls back on new runway

Passenger numbers declined 1.4 per cent to 13 million for Auckland International Airport. Photo / Greg Bowker

Auckland Airport is putting the brakes on building its northern runway to save $9 million this year as it forecasts a weakening in underlying profit due to soft passenger numbers.

The company expects profit to range from $93 million to $100 million for the current financial year.

Yesterday it reported a 2.1 per cent lift in underlying profit to $105.9 million, although a devaluation of its investment property portfolio as well as one-off restructuring costs saw actual net profit after tax down 63.1 per cent to $41.7 million.

Revenue rose 5.2 per cent to $369.2 million, helped by a strong second-half retail performance, some late property deals and extra charges to use the airport's expanded international terminal.

Passenger numbers declined 1.4 per cent to just over 13 million and total aircraft movements were down 1.8 per cent to 156,781.

The company said the operating environment was "brutal" and it was not certain whether the aviation sector was through the worst.

Chief executive Simon Moutter said he took the helm just as world markets collapsed but had finished the year in good shape.

While the current year's forecast profit was down with passenger volumes likely to remain subdued, the prospects for the 2011-2012 financial year were better.

"What we have indicated is that with some return to growth in passengers the outlook is very favourable."

Moutter said the northern runway would be deferred for 12 months to allow passenger volumes to catch up.

The first stage of the runway was due to be completed by 2011 but had no direct connection to providing Rugby World Cup infrastructure as it was a narrow 1200m runway suitable only for small commuter planes.

Construction began last spring and was well ahead of schedule and theoretically could be finished on schedule if passenger numbers picked up markedly against the trend.

"We must carefully ensure the additional infrastructure capacity is delivered on time to meet future tourism and trade demand - not ahead of or behind this demand."

The company would have to spend $2 million preserving work already underway and demobilising the contractor. The pause would also give the airport time to clarify with the Commerce Commission what valuation methodology would apply to the runway.

The deferral for six months of some aeronautical charges for airlines would cost it $2 million.

Moutter said the company was working with several more proactive airline customers to help drive the aviation market.

Air New Zealand, the company's biggest airline customer, and often its biggest critic, has praised the airport although it still has underlying issues with its cost structure.

The airline's chief executive, Rob Fyfe, said on Thursday the relationship with the airport was improving.

"In contrast to some other airports we're being treated more as a customer rather than a cow to be milked."

Moutter said although Pacific Blue and Jetstar had begun new international services during the past year, long-haul route development work took more than 18 months to show up in results.

The airport has come off a five-year intensive building programme costing $500 million but hadreduced spending over the lastyear to $87.5 million, which hadbeen invested in a range of airfield, terminal, retail and property projects.

Those included completion of Pier B of the international terminal, the opening of new off-terminal parking, ongoing work on the northern runway, and a start to first-floor redevelopment at the international terminal.

Forsyth Barr analyst Jeremy Simpson said the result was at the high end of market expectations.

"It was a good result, stronger than we were going for. It's a good number in a recessionary environment."

The airport says it will pay a fully imputed final dividend of 4.45c a share, bringing total ordinary dividends to 8.20c a share. Its share price finished up 1c at $1.76.