Scott Tasker, chief customer officer Auckland Airport shares details of redevelopment projects. Video / Michael Craig
Auckland International Airport has launched a $1.4 billion equity raise to help pay for its $6.6b multi-year development plan, including a $2.2b upgrade of its domestic terminal.
The capital investment programme would help the country’s largest airport replace infrastructure built in the 1960s, upgrade the airfield and runway and improve connectivity between international and domestic jet services, reducing minimum connection times between flights.
“As the primary border of Aotearoa New Zealand and gateway to its largest city, Auckland Airport is making a once-in-a-generation investment to be resilient and fit for the future,” Auckland International Airport chief executive Carrie Hurihanganui wrote in the market announcement.
“The proceeds will initially be used to reduce net debt, repay the $150 million October 2024 bond maturity as well as a further $100 million of unhedged drawn facilities, and provide flexibility to fund Auckland Airport’s planned capital investment programme over the remaining years.”
Auckland Airport is the biggest in the country and a hub for Air New Zealand. Photo / Michael Craig
The raise included a $1.2b placement of new shares to institutional and other select investors in New Zealand and Australia, issuing 172.7 million new shares, equal to 11.7% of its current issued capital, at $6.95 per share.
The remaining $200 million would be raised through a retail offer with existing airport investors in New Zealand allowed to subscribe for up to $150m and in Australia up to $45.5m
The price of shares in the retail offer would be lower than the placement price – more details would be announced on September 19.
The airport had signed a contract with Hawkins Construction, worth about $800m, to manage and deliver the domestic terminal upgrade.
The new domestic terminal was expected to cost $2.2b in total and should open by 2029.
It was more than 20% complete, with an external structure of a major building block known as “the Stitch” – the new connection point between the international terminal and new domestic jet terminal – almost finished, with the baggage hall on the ground floor operating.
Airlines including Air New Zealand and Qantas have criticised the investment, saying the airport fees charged to pay for it would make travel unaffordable.
Auckland airport crane at work on "the stitch" - the construction that intergrates the international terminal into the new domestic jet hub
The airport’s aeronautical activities, such as landing and take-off charges, were regulated – a recent decision by the Commerce Commission reviewing its charges found its revenue and profits were excessive but its investment in infrastructure appeared appropriate.
The company raised $1.2b in April 2020 to reinforce its balance sheet during the pandemic.
Its major shareholders included Auckland Council, which owned 11% after selling down its stake last year. The Accident Compensation Corporation owned 2.88% and the New Zealand Superannuation Fund owned 1.92%.
Auckland Airport’s underlying profit for the year to the end of June increased 87% to $276m as international traffic returned to 91% of pre-Covid levels.
However, its reported profit after tax was down 87% to $5.5m in the year, and the company warned it would take longer than expected for recovery of passenger numbers to reach pre-pandemic levels.
In total 27 airlines flew non-stop between Auckland and 42 international destinations in the financial year, up from 25 airlines and 40 destinations in FY23.
Madison Reidy is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
