Auckland International Airport MD, John Goulter

Friday 14th September 2001

Following is a ShareChat Investor Interview with the Managing Director of Auckland International Airport (NZSE: AIA), John Goulter. The interview was conducted during August/September 2001 and published on ShareChat on September 14, 2001.

SC Investor: The upcoming sale of Sydney Airport is going to be a high profile event in Australasia. Do you think this activity will lead to a greater interest and awareness to the valuation of airports and as such have a positive impact on the valuation of AIA by the market?
John Goulter: The number of either listed or privatised airports continues to grow. Frankfurt has recently listed and Schipol is scheduled to list later this year or early next. Sydney is obviously the largest airport sale in Australia and will create considerable investor interest. A trade sale, as opposed to a public offering, a price of between A$4.5 billion and A$5.5 billion has been suggested in media reports.
With a wider spread and greater number of airports able to be used as a comparison base, we believe our results, which compare very favourable against all others, will continue to be seen as very positive.
SC Investor: Would the company be interested in taking a stake in Sydney Airport, or any other airport for that matter, now that it has considerable experience in running one as a corporate entity?
John Goulter: We have very considerable opportunity to further develop the Company at Auckland in both the property development and retail sectors. Also the aviation sector will continue to grow for us.
To date we have not been able to identify an offshore opportunity that provides better returns than from our current "on-airport" growth. The same comment applies in a domestic sense although we do keep a watching brief for possible opportunities. We have no specific interest in Sydney Airport.
SC Investor: What do you think of the Macquarie and AMP Henderson airports fund (recently listed or to be listed in the ASX)? How are these trends beneficial to AIA in particular and airports in general? Why the proliferation in airport funds?
John Goulter: The Macquarie and AMP Henderson airport funds, as we understand it, are to be listed later this year. The trend of more listed or privatised airports is as suggested in the response to question 1, beneficial to our Company in a comparison sense and as well provides a broader base for the airport industry sector.
Given the historical and forecast growth in air travel along with commercial development opportunities, airports today are seen as excellent long-term investments and various funds are evolving with the expectation that further airports will become privatised or listed.
SC Investor: The airport now has The Warehouse and other retail stores on its site. Can you maintain the current expenditure on building of new properties? How large could this Airport Shopping Centre be in, say, 10 years time?
John Goulter: We are spending in the vicinity of $15 million per annum on commercial property developments. Numerous projects are under consideration and once agreed long-term leases are signed, a project then proceeds. We anticipate the current $90 million of investment property more than doubling over time.
With the advent of the Foodtown Supermarket opening on September 30 the first stage of the Airport Shopping Centre is complete. A second stage is under review and this retail complex will grow further as demand supports.
SC Investor: Can you give us an update on the timetable for development of a second runway at Auckland International Airport? If it were offered to you, at what price would an outright purchase of the Whenuapai Air Force base be a cost effective alternative?
John Goulter: There are numerous factors which influence the timetable for the second runway. Growth in visitor numbers; the incidence of New Zealanders travelling; the growth of GDP; the population growth; the number of aircraft movements etc. etc. all play a part in the forecast timetable.
At this stage, our most recent forecast is a start on a 1200m runway (or initially a taxiway used as a runway) for smaller aircraft will commence around 2005/2006.
The Whenuapai airforce base is of no direct interest to the company, as we see little if any commercial reality associated with a further airport in the immediate area.
SC Investor: So far, AIA has a compound growth rate of about 16-20% per year. Do you envisage this growth rate in the next 5 years or so and if yes, why?
John Goulter: It would be inappropriate for the Company to comment on future growth rates although it is fair to say the market analysts are suggesting a continuation of double-digit growth.
SC Investor: What percentage of net profit is contributed by property now and what do you envisage it to be in 10 years time? Will rent reviews lead to lower rents?
John Goulter: Revenue from property (including investments, properties and the rental of offices and lounges in the terminals) amounted to $17.9 million for the FY01 year (10% of revenue). We do not disclose separately the net profit contribution.
As stated investments in this area amounts to approximately $15 million per annum and we would expect that rental income would grow by at least 10% per annum.
SC Investor: Do the local councils that hold shares in the company have any say or influence in the running? I am not sure if they are represented on the board or not.
John Goulter: The two city councils with a shareholding in the Company (Auckland City and Manukau City) are not directly represented on the six-person board. The Councils do not participate in the day to day running of the Company.
SC Investor: What are the reasons of maintaining reasonably high term borrowings?
John Goulter: In fact the Company's borrowings are viewed as conservative by many. The ratio of Shareholders' Funds/Total Assets of 61% is very strong and the balance sheet is capable of bearing higher levels of debt, with higher interest costs of course.
SC Investor: Has the company considered a Dividend Reinvestment Plan?
John Goulter: We have considered such a Plan but the Directors remain of the view that the interests of the Shareholders are best served with a lesser number of shares on issue, not more.
However, the Directors will continue to review the position from time to time.
SC Investor: Bearing in mind Changi's holding in AIA, and my own optimism that in due course this will lead to a greater equity participation by Changi, can you tell us about the relationship between the two companies?
John Goulter: The relationship between our two companies is extremely positive and we assist each other wherever possible as well as sharing operational expertise where appropriate.
We do not however exchange financial information other than what occurs via normal reports put out by the Company.
Further comment is made in respect of the answer to question 14.
SC Investor: Can you tell us about the current state of play with regards to the dispute in the increase of the landing rights charges between AIA and Air NZ?
John Goulter: This matter is due to be heard by the Court in February 2002. Although Air New Zealand are not paying landing charges at the new rate, all other airlines are. The amount outstanding from Air New Zealand ($1.6 million) is accounted for in debtors and we are totally confident that this amount will be collected.
SC Investor: What updates to your terminal and ground facilities would be necessary to cope with the arrival of the larger than jumbo jet Airbus plane which at least one of your customers (Singapore Airlines) have purchased for delivery in the near future?
John Goulter: Both Singapore Airlines and Qantas Airways have placed orders for the Airbus 380 which will carry in excess of 550 passengers. The first aircraft of this type is forecast to be in service around 2006.
All facilities at our airport including the runway are compatible with the specifications of this aircraft.
We anticipate around 2005 we will further consider our airbridge capacity and if necessary may construct a new pier (or part thereof) to specifically handle this aircraft. It may well however, be closer to 2010 before this aircraft becomes a regular visitor to Auckland.
SC Investor: What competencies over and above the passive investment capital supplied, does the sizeable Singaporean shareholding add to your company?
John Goulter: Apart from the approximate 7.1% shareholding of Singapore Changi Airport in the Company, we also have an International Airport Co-operation agreement with Changi. Accordingly we do compare and discuss numerous marketing, operational and facilitation matters on an ongoing basis.
SC Investor: Do the number of people using airline lounges (such as Koru Club etc) have an impact on your revenue or do you just get paid a set rental by the airlines for the space?
John Goulter: All airline lounges are provided to the particular airline on a rental basis.
SC Investor: With an obvious interest in pushing passenger numbers through the airport, how much money does the company put towards promoting New Zealand as an international tourist destination, and where is this money spent? What about money spent on promoting Auckland as a domestic tourist destination?
John Goulter: The Company supports the New Zealand and Auckland tourism industry and associated markets in numerous ways ranging from key executive support, to assistance with space for Tourism Auckland at the airport. Joint promotions and marketing support is also provided to various international airlines. The Company does not financially promote New Zealand offshore.
SC Investor: There seems to have been a lot of comment recently that the airport's shares are fully valued. What is your opinion of this view?
John Goulter: The stated goal of the Board and management has always been to further enhance the value of the Company and to increase shareholder wealth. We have suggested a further improvement in performance for the current year and the overall outlook remains extremely positive.

ShareChat thanks John Goulter for taking part in this Investor Interview.

Comments from our readers

No comments yet