Auckland International Airport continues to soar

By David McEwen

Friday 25th October 2002

Auckland's airport has come a long way since the days when passengers had to sit in a draughty hanger, fighting to keep their sandwiches safe from the swooping sparrows. Nowadays it wins top marks for not only the quality of its facilities but also the quality of its earnings, which are exceptionally strong.

In its annual report, Auckland International Airport (AIA) makes a point of letting the reader know what it achieved "in a year notable for the significant upheavals in international aviation markets," following the terrorist events of September 11.

That combined with the demise of Ansett Australia and the financial knock-on to its major customer, Air New Zealand, could have played havoc with the airport. But it didn't.

AIA's revenue increased 6.2%, or $11.8 million, to $201.2 million, while operating expenses fell nearly $2 million to $48.9 million. This resulted in an increase in earnings before interest, taxation and depreciation of $152.2 million, from $139.1 million previously. The consequent rise in earnings per share, by 20%, was a surprise to many who expected AIA to suffer badly last year.

The share price has reached record levels on the perception that the company is largely crisis-proof. And when a company is crisis-proof and a monopoly, that's even better. AIA, of course, is not just about planes landing and taking off. In fact, the largest part of its income doesn't come directly from planes at all.

The annual report gives a detailed breakdown by income source, which shows that for the year to June 2002, AIA derived $57.8 million of its revenue (29% of the total) from retail income; $21.6 million (11%) rental income; $12.7 million (6%) carpark income; $53.6 million (27%) airfield income; $14.8 million (7%) terminal services; $8.1 million (4%) utilities and $32.5 million (16%) development charges .

AIA was helped in that inbound tourism held up remarkably well, as New Zealand became branded as a safe destination.

The directors sound a note of caution, however, that the next year could be tougher than the last. The traditional 5-7% growth pattern of the industry, they say, will have to be adjusted to growth of 3-5% for the 2002/2003 year.

However, earnings are unlikely to fall, they add, "as international growth at these levels, coupled with increased returns from the renegotiated retail arrangements and continuing expansion of the company's investment property portfolio, should provide another increased operating result."

AIA's annual report is visually unusual, in that you have to leaf through a 14-page picture montage, without a single word appearing, before you eventually get to the financial statements. It's a bit like going through someone's photo album, albeit someone who's mad about planes.

However, the essential data is all there, including graphs on monthly passenger movements, detailed expenditure analysis and volume of cargo passing through the place.

The directors' report contains a brief note on chief executive John Goulter, who decided recently to retire after 15 years in the top job.

Mr Goulter came into the job when the airport had a couple of duty-free stores, a small choice in food and little else. Yet a captive audience of 15 million people passed through the airport every year, comprising passengers and the "meeters and greeters" who accompanied them.

Seeing it as his mission to open the 15 million wallets belonging to these people, Mr Goulter set about developing an attractive commercial environment at the airport in a themed space.

Simultaneously, the airport began developing its huge tracts of spare land into office and commercial villages, while somehow retaining the aesthetic values of the rest of the airport.

In all this Mr Goulter succeeded in turning AIA into a hub of excellence where before it was merely a place you passed through. That's an impressive legacy.

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