AIA picks 10% profit growth

By Phil Boeyen, ShareChat Business News Editor

Tuesday 21st November 2000

Auckland International Airport (NZSE: AIA) is forecasting 10% profit growth for the current financial year after a positive first quarter.

Chairman Wayne Boyd told the company's AGM today that for the three months to the end of September the airport has experienced positive trends in both passenger and flight movements, with international passenger arrivals and departures up 3.8% for the period.

Domestic passenger movements are also up, rising 5% for the quarter, and domestic flight movements rose 1.2%.

"Based on these positive trends in our key business drivers - passengers and aircraft movements - for the first quarter we are of the view that a profit improvement in the order of 10% will be able to be achieved in the current financial year," says Mr Boyd.

Mr Boyd also defended the airport's decision earlier this year to increase landing charges at the airport. Air New Zealand is refusing to pay the increase, and has filed court action against the company.

"You may be wondering how the company can justify increases in these charges when, at the same time, it is reporting record levels of profitability."

"The methodology adopted in setting the charges works on the basis of applying a fair rate of return on the appropriate value of the assets involved in those areas of the company's identified airport activities - that is, the airfield and the terminals predominantly - and then, after allowing for the inclusion of operating and other costs, the Company is able to determine the level of revenue that is appropriate to those areas of the business."

Shareholders were told that the company has offered all airlines a reduced increase - from 8.5% to 7.5% - for the first year as a way of avoiding unnecessary litigation, and that two large international airlines have signed an agreement on this basis.

However if the issue does end up in the courts, Mr Boyd says the airport will rigorously defend itself against allegations that it failed to properly consult with airlines before increasing the charges.

"The company considers that, with the guidance of its legal advisors, it robustly and completely followed the consultative process. Accordingly, the company will be defending these allegations and will look to the Courts to confirm that the company has acted lawfully."

Mr Boyd says the increased landing charges are also linked to capital expenditure in the order of $140 million over the next five years, and that the company has to earn a satisfactory return on the extra spending.

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