Aircraft parking revenue jumped at Auckland Airport although it has given airlines a $9m break. Photo / Brett Phibbs
The Level 4 lockdown is a fresh blow to Auckland International Airport, which has reported its first loss since listing on the sharemarket in 1998.
International passenger numbers in the year to June 30 fell to their lowest level since 1972.
That was the year that Qantas landed its first Boeing 747 at the airport, Led Zeppelin played at Western Springs, Norman Kirk was elected prime minister and Ian Kirkpatrick led the All Blacks on a four-month tour of the British Isles.
In the latest financail year, international passenger numbers fell from 8.4 million to 602,000, including transits.
Auckland Airport's revenue more than halved and the company's underlying profit tumbled from $188m in the 2020 financial year to a $41.8m loss in the latest 12 months to June 30.
The company says the aviation outlook is too uncertain to provide guidance for the current year. The airport is consulting airlines about delaying fixing aeronautical charges for the next four-year period. For the second year in a row, the company that usually provides a reliable yield will not be paying a dividend.
Auckland Airport chief executive Adrian Littlewood said the latest lockdown - which will extend at least into the middle of next week in Auckland - came as domestic operations had built close to pre-pandemic levels.
"It has been really important to us and has helped fund our operations in this period. There is no doubt that shutting down domestic has hit us really hard and the longer it goes on, the greater the impact.''
From tomorrow, airlines are due to run only skeleton services for essential workers. with the exception of Queenstown.
However, he said the airport had comfortable financial headroom after raising equity last year, restructuring its funding arrangement and covenants. He said the airport had close to $900m in cash and undrawn facilities at its disposal.
''We've been well prepared for a range of scenarios and always have been,'' said Littlewood, who leaves the company towards the end of the year after nine years in the top job.
In normal times, domestic operations provide about 20 per cent of revenue, transtasman about 40 per cent and other international travellers provide the remainder. Revenue for last year, which was hit for three months by Covid, was $567m but this had fallen to $281m.
A breakdown of revenue shows how widely and deeply the pandemic has cut into the business.
Airfield income decreased 36.4 per cent to $64m, far less than the reduction in passenger volumes as airlines maintained connections to serve strong air cargo demand.
As part of airfield revenue there was a 49.2 per cent increase in aircraft parking charges to $18.2m, due to longer aircraft layover times, although the airport did provide $9m in relief for aircraft in long-term storage.
Passenger services charge income fell 81.8 per cent to $24.2m, by much more than the 58.5 per cent reduction in total passengers, reflecting the 93 per cent reduction (to 599,000) in higher yielding international travellers.
Auckland Airport provided more than $185m of abatements to terminal retailers and as a result, total retail income for the 2021 financial year was $17.8m, a decrease of 87.4 per cent or $123.7m on the previous financial year.
Car parking income fell 42.9 per cent to $28.7m.
One bright spot was that the investment property division continued to perform strongly, with occupancy remaining at 99 per cent, the annual rent roll increased 12.5 per cent to $117m and the portfolio value grew 29 per cent to $2.6 billion.
Littlewood said the 2021 financial year had been a year like no other for Auckland Airport.
"Covid-19 changed our business overnight, bringing constant upheaval to almost every part of our operation."
The company had gone further to control costs and reset the business in the 2021 financial year to ensure it reflected the new operating environment, including:
• Scaling back operating activity resulting in a significant reduction in
operating expenses
• Repaying the remaining $425m US Private Placement (USPP) borrowings. This, in addition to closing out a number of interest rate and currency hedges, is expected to reduce Auckland Airport's 2022 financial year interest expense by more than $10m.
This month banks supported the company's request to renew nearly $700m of debt facilities due to mature between January and April 2022.
From January 2022, Auckland Airport has agreed that the interest cover covenant currently waived by lenders will convert from an Ebit-based measure to a new Ebitda-based measure.
Littlewood said taking these steps had renewed Auckland Airport's confidence
in its ability to fund the planned infrastructure programme for the 2022 financial year and beyond.
A reset infrastructure programme, including a domestic jet hub integrated with the international terminal, would be aligned to the recovery of international travel.
The company also unveiled plans to develop a fashion outlet centre on the
northeastern edge of the airport precinct, generating more than 500 new jobs across more than 100 stores and food outlets.
General manager of property and commercial, Mark Thomson, said there was a significant gap in the market for a purpose-built fashion outlet centre and the airport
had been exploring the concept for several years.
"There's still work to do in order to bring this project to life, but we have an
extraordinary site and design, the investment fundamentals are strong and the
support from retailers and consumers for this concept has been very encouraging."
While layoffs during the year meant staff costs fell from $62.9m to $46.6m, the remaining full-time workers are being given a bonus of $1500 worth of shares.
Littlewood said that throughout all the uncertainty of the past 18 months, staff had been determined to get the job done and go the extra mile for New Zealand.
"I'm really proud of our team and their work to keep Kiwis connected to each other and the world and in recognition of their efforts we are giving $1500 in shares to each of our permanent employees – both as an acknowledgement of their hard work but also the critical role they will play as aviation recovers."
Littlewood, who told the Herald he has no fixed plans when he leaves the company this year, got a pay boost in the financial year. His total remuneration jumped to $2.516m from $1.322m in 2020 with the resumption of short term incentive payments. His basic salary increased from $1,241,743 to $1,279,307 .
Just on 93 per cent of front line staff had been fully vaccinated and all those in those roles would need to be by the end of next month.
He said he would like to see the pace of the vaccine programme continue to accelerate and urged authorities to look at all testing technology that could help speed up the recovery of travel.
"We're not counting on a recovery to 2019 of international traffic to get going soon - we only need domestic to operate normally as it has been and a modest recovery of the Tasman. It means we can look ahead and ask how do we get on with our infrastructure programme."
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