Auckland Airport's four months results (unaudited) and outlook

Auckland Airport chairman John Maasland told today’s annual meeting that the long-term outlook for the company remains positive.

“A number of our major airline customers are looking to significantly expand their fleets over the coming years. Along with New Zealand’s popularity as a world leading tourism destination, this will underpin continuing growth in air travel, particularly in the Australasian and Asia-Pacific regions,” Mr Maasland said.

This year has seen resurgence in growth of passenger volumes at Auckland Airport, with growth beginning to return to the company’s long-term average of approximately 5 per cent per annum. A strong New Zealand dollar and new airline services have clearly stimulated demand by New Zealand travellers.

“It is encouraging that, notwithstanding New Zealand’s higher exchange rate, economic prosperity overseas has seen inbound tourism traffic continue to grow. Continuing strong growth in passenger numbers from new markets such as China and India is really encouraging for the longer term.

That said, in the shorter term, the impact of high interest rates, a slowing domestic economy and increased air fares on the back of higher fuel prices could see an easing back in the recent demand,” Mr Maasland said.

For the first four months of this financial year, international passenger movements (excluding transits and transfers) were up 4.0 per cent to 2,109,261. This was due in part to strong growth in New Zealand travellers.

Domestic passenger movements increased strongly, up by 6.5 per cent to 1,762,615. Total passenger numbers increased 4.0 per cent to 4,179,658.

However, total aircraft movements were down 1.9 per cent for the four-month period. This was primarily due to larger aircraft replacing smaller aircraft on domestic routes, along with the cessation of some international and domestic services.

The outlook for the airline summer schedule appears to be consistent with last year, although the expectation is for higher load factors.

Reflecting the increased passenger volumes, along with recent aeronautical and commercial pricing resets, revenue for the four month period increased 7.0 per cent on the corresponding period last year to $110.9 million. However, there has been some pressure on operating expenses. Earnings before interest, tax and depreciation (EBITDA) for the four months was $84.6 million, an increase of 3.5 per cent over the previous year.

Surplus after tax for the four months to October 2007 was $31.9 million, compared with $32.4 million for the previous year. This small reduction reflects the on-going depreciation and interest costs being incurred by the company in connection with the current investment programme.

Based on the current demand environment, the directors continue to expect revenue growth for the 2008 year to be in the order of 7 per cent. However, with the additional cost pressures being experienced, particularly in personnel, rates, legal and consultancy expenses, it is likely that EBITDA growth will now be around 6 per cent based on EBITDA for the 2007 year excluding the long-term incentive provision. This also excludes any revaluation gain in connection with the company’s investment property portfolio.

The company has also incurred to date significant one off expenses of approximately $4.5 million directly in connection with the review and investigation of the restructuring proposals, including the Canada Pension Plan Investment Board and Dubai Aerospace Enterprise proposals. Depending on the outcome of these proposals, these costs may be expensed in the 2008 year. The company’s review of these proposals has also resulted in some additional operating costs as referred to above.

“The December completion of the domestic terminal “extreme makeover” and Stage 1 of the expanded arrivals project and Pier B in 2008 means Auckland Airport’s processing capacity and services will be greatly improved. These projects will also ensure demand growth over the next three to four years can be handled without service standards being compromised,” said Mr Maasland.

“The board and management remain dedicated to the long-term growth of our airport and to continue to deliver long-term value to our shareholders.”