Auckland Airport buys up quarter of Queenstown Airport

A Jetstar A320 takes off from Queenstown Airport. Photo / Supplied

Auckland International Airport has this morning spent $27.7m buying a stake in Queenstown Airport.

Auckland Airport now owns a 24.99 per cent share in the Queenstown airport company which is issuing new shares as part of the deal.

This means no cash is being paid to the Queenstown Lakes District Council, which is 100 per cent owner of the airport.

Both companies are pitching the deal as a "strategic alliance", with Queenstown Airport saying it expects to achieve an additional 176,000 annual passenger movements within five years, over and above existing strong growth forecasts.

These additional visitors could mean an extra $150 million annually to the local Queenstown economy.

Queenstown Airport, following approval from the Queenstown Lakes Council, may also exercise an option for Auckland Airport to increase its shareholding to 30-35 per cent at any time up to June 30 next year.

"Through this strategic alliance, the country's number one travel gateway and our premier tourist destination will work closer together to grow New Zealand tourism, said Auckland Airport chairman Tony Frankham.

He said the alliance would "leverage Auckland Airport's resources in a co-ordinated effort working with airlines and the travel industry".

Queenstown Airport's chairman, Mark Taylor, said the deal "made perfect sense" as 70 per cent of New Zealand's international tourists entered the country through Auckland International Airport.

The new share capital from Auckland Airport would allow Queenstown Airport to fund growth of the airport's operating capacity without increasing financial risk through borrowing more extensively.

"A stronger capital structure would also allow, for the first time, the company to pay regular dividends back to the community via the Queenstown Lakes District Council shareholding," said Taylor.

In the same news release issued this morning, Queenstown Lakes District Mayor Clive Geddes said the partnership would help secure the economic prosperity of the local economy which is strongly reliant on tourism.

He said it would ensure Queenstown Airport kept on a strong, sustainable growth path while ensuring control of the airport remained in local hands through the Council's majority shareholding.

"As shareholder, the Council has always supported the growth of Queenstown Airport, recognising its vital economic importance as a key gateway to the Queenstown Lakes District and surrounding areas."

Auckland Airport's chief executive, Simon Moutter, said the "strategic alliance" was consistent with Auckland Airport's strategy to add to shareholder value by shifting some resources into areas that will drive earnings faster than the company's organic growth rate.

"We can accelerate growth in international passenger volumes - which represent our biggest value driver - by forming deeper partnerships with selected and like-minded airports that share our growth focus on particular airlines and travel markets (especially out of Asia), he said.


The deal:
• Auckland and Queenstown Airports say they will work together "for at least five years as part of the new strategic alliance".

• Effective today, Auckland Airport has bought an initial 24.99 per cent shareholding of the increased capital in Queenstown Airport by subscribing for approximately 4 million new shares at a price of $6.91 per share, for a total consideration of $27.7 million.

• Queenstown Airport may exercise an option for Auckland Airport to increase its shareholding to 30-35 per cent at any time up to 30 June 2011. The price for the additional shares will be $7.47 per share, plus a lump sum consideration of $2.2 million, reflecting the additional value of a shareholding over 25 per cent.

• Auckland Airport is funding the share purchase from its current cash holdings.

• Before deciding whether to exercise the second tranche option, Queenstown Airport will seek approval from the majority shareholder, Queenstown Lakes District Council, which will decide whether community consultation is required.

• If the option is exercised, Auckland Airport would enter into a binding shareholders' agreement with Queenstown Lakes District Council that would formalise arrangements between the shareholders.

• Auckland Airport has already received the necessary regulatory approvals to acquire a minority shareholding in Queenstown Airport.

-NZ HERALD