Auckland Airport guidance update: Heading for loss of up to $55m, vaccines key to recovery

Auckland International Airport chief executive Adrian Littlewood. Photo / Alex Burton

Auckland Airport says the burst transtasman bubble will dent traveller confidence but it has maintained earlier earnings guidance.

For the full year it expects an after-tax loss of between $35 million and $55m.

Its chief executive, Adrian Littlewood, said transtasman flights were key to the airport's recovery and the pause on passenger flights to Australia had prompted the company to update the market.

"The lifting trends in passenger loads will no doubt be softened by this.

"The recovery track we were on before is probably going to flatten out and that flows through to when it happens in the next financial year."

Continued uncertainty around international travel was expected to impact passenger numbers and related revenue for the remainder of the calendar year, but he said because of the likely effect of the vaccine rollout the company could now plan with more confidence for next year.

"In an odd way we have more certainty in the recovery than we have in the last 15 months."

The New Zealand aviation industry was relying on the Government's commitment to vaccinate the adult population by the end of the year and could now look at evidence from overseas where countries much further down the track with vaccinations were opening up quickly.

"This [bubble pause] will dent confidence until vaccines come in - that's why the Government's programme is the catalyst for confidence returning and travel restarting."

The information flow from the Government had improved but there needed to be work "at pace" to come up with a plan for how vaccinated people will travel to and from this country.

"By the time the vaccination programme hits scale we need to be ready with operational processes and changes we need to put in at airports. These things don't happen overnight," said Littlewood.

"There is no question that if we don't put the time in now the path to reconnecting will be longer and more difficult."

Vaccination and pre-travel testing would be the key, as the rest of the world opens up.

"We need to find a way out of this and that matches with the vaccination programme," he said.

Domestic and Cook Islands passenger demand is strong but international travel numbers remain at historically low levels at the airport.

The international passenger recovery in New Zealand was unlikely to materially change until the vaccination programme rolls out.

The airport has spent on gearing up for transtasman travel. Photo / Michael Craig

"As a result, international passenger numbers and those business lines linked to passenger volumes, including retail and transport, may remain very subdued for the remainder of the calendar year. However, we do expect steady recovery from early in calendar year 2022."

The company continued to provide support to international terminal retailers with rent relief, so they are also well placed to manage through the current uncertainty and recover strongly as international passengers return.

"Based on a slower than previously anticipated recovery in passenger numbers, retail income is expected to be impacted with total retail income for the 2022 financial year currently expected to be in the range of $25m to $35m."

The establishment of safe travel arrangements with Australia had already triggered a scaling up of operations at the international terminal, plus some outsourced operations, including airside and landside bussing, car parking, valet and cleaning.

Nana Ioane and Nancy Rimoni when quarantine-free flights from the Cook Islands started. Photo / Brett Phibbs

These operations, plus accelerated repairs and maintenance while many of the aeronautical facilities are running below normal occupancy levels, are anticipated to result in operating costs being in the range of $160m to $175m in the 2022 financial year.

Following the $65m scheduled repayment in February this year, Auckland Airport has now prepaid the remaining $425m USPP borrowings.

"When combined with the cancellation of cross-currency hedges associated with the USPP borrowings as well as some future fixed interest rate hedges this is expected to reduce Auckland Airport's 2022 financial year interest expense by around $10m," Littlewood said.