Emirates is bringing back its A380s on daily non-stop flights to Dubai. Photo / Dean Purcell
Auckland Airport will look "very closely" at renewing dividends in the second half of this financial year as it rides the wave of an extremely strong recovery in aviation.
The company today announced that it expects underlying profit after tax to surge to $100 million to $130m in the current financial year, up from guidance in August of between $50m and $100m.
Pre-pandemic, the airport was a reliable dividend provider but these payments were suspended when Covid-19 hit and profits evaporated, and as a requirement of banks which recapitalised the company.
While an interim dividend this year remains off the table, those banking requirements roll off in the second half and a dividend could then be considered.
In 2019 the company paid a full-year dividend of 22.25c a share, three times that of five years earlier and reflecting rapid earnings growth during what was dubbed "The Golden Age of Travel".
Auckland Airport's (AIA's) dividend policy has been to pay 100 per cent of underlying net profit after tax, excluding unrealised gains and losses arising from a revaluation of property or treasury instruments and other one-off items.
Under the policy, directors may consider the payment of ordinary dividends above or below this level, subject to the company's cash flow requirements, forecast credit metrics and outlook at the time.
Chairman Patrick Strange said at the annual shareholders' meeting that dividends would get "a lot of attention" in the second half of this year, as would the dividend policy.
"Dividends are important to many shareholders but we've got to look at how strong the recovery is - where we sit," said Strange. "We will spend a lot of time in the second half looking at it."
For the 12 months to June 30 this year, when dividends were suspended, the company reported an underlying loss after tax of $11.6m.
The airport company is popular with small retail investors. Of the 51,000 AIA shareholders, 43,000 own fewer than 5000 shares. The biggest single shareholder, with just over 18 per cent of the company, is Auckland Council, which is in dire need of dividends being restored after its own finances fell into a deep hole during the pandemic.
Harbour Asset Management portfolio manager Shane Solly said the upgrade was welcome news but the airport was still relatively cautious, which was understandable given the head winds facing airlines.
It "certainly provides a good pathway to expect a modest dividend to be paid in the foreseeable future," he said.
Strange said that since early 2020, the company had a three-stage plan to chart a course through the pandemic: respond, recover and accelerate.
"We are now well into the recovery phase, increasingly apparent as our national carrier and global airlines rebuild their connections and schedules."
Chief executive Carrie Hurihanganui said the upgraded guidance was the result of aviation's strong performance both domestically and internationally.
There had been a stronger-than-expected rebound in the aviation market, particularly in North and South American, the South Pacific and on transtasman routes.
Now there is more certainty about the performance of the market over the coming months, with high aircraft load factors and continued strength in forward international seat capacity indicating a better-than-expected summer peak.
"Overall we are increasingly confident that aviation is returning to normal."
For the full 2023 financial year, the airport was now expecting international passenger numbers to be between 60 and 70 per cent of pre-Covid levels and domestic passenger numbers between 85 and 90 per cent.
The airport says it has adjusted its outlook which is now in line with the International Air Transport Association (Iata) view that the global industry will recover to pre-pandemic levels by the end of 2024.
Earlier this year Iata forecast that passenger numbers would reach four billion in 2024, about 103 per cent of pre-Covid levels.
Hurihanganui also updated shareholders on AIA's capital programme.
During the 2022 financial year it focused on transport improvements, core infrastructure upgrades and enabling works to support future terminal and new property developments – with over $250m in capital expenditure.
It spent $80m on the combined domestic and international jet terminal, including design and enabling works for a new dedicated domestic jet pier, customer dwell and retail space and smarter baggage services.
"The exact timing of the combined jet terminal project will be guided by the conclusion of airline consultation and will be a five-year build from the point of construction commencing," she said.
Earthworks were now finished at Mānawa Bay, a $200m-plus, 100-store premium outlet shopping destination on the northeastern edge of the airport precinct.
Work is also under way on a $300m transport hub, a carpark (with 150 spaces for electric vehicle charging), 400m of public kerbside pickup and drop-off and a public transport terminal. The pickup and drop-off area would be finished this time next year and the entire hub in 2024.
It has provision for light rail from central Auckland, which could cost up to $29 billion, mainly funded by taxpayers.
Strange was non-committal about the project and said: "When it will happen, whether it will happen - wiser people can opine on that."
He said it was his personal view that more could be done linking the existing rail network to the upgraded Puhinui Station, which now just has bus links to the airport, although a rail link has been mooted.
"We think it is a very vital transport link to the airport, the road has been upgraded, there is some investment required by Kiwirail like a third track to make it hum - we would certainly be a backer of that to the Government and the new mayor [Wayne Brown].
Strange also called for more to be done to encourage tourism.
"To rebuild the visitor market which is so vital to this country - pre-Covid it was our biggest earner and employer. We have to step up as a nation and encourage visitors to come here. Currently, other nations - like our friends across the Tasman - are investing heavily in encouraging airlines and international routes to return to their shores," he said.
"I am hopeful that our country will do more to rebuild visitation in the months ahead. The decisions we make now will have a major bearing on the speed of our country's recovery and the future shape of our tourism industry."
Airline schedule monitoring company OAG this week reported that global capacity will end the year at 87 per cent of 2019 levels.
If 4.8 billion scheduled seats is achieved in 2022 that will be 31 per cent more than in 2021 and this has led to boom times for airlines, in spite of some of the highest operating costs ever.
"As the second quarter financial results for airlines begin to be finalised, for many carriers revenues are higher than ever reported before, suggesting that it has been a bumper season for airlines around the world."
Continued confidence in the market is reflected in airline capacity broadly remaining unchanged week-on-week through to the end of the year, says OAG.
At Auckland Airport, new or revived services coming up during the next six weeks include:
• Air New Zealand Auckland-Chicago, 3 times a week from October 30
• American Airlines Auckland-Dallas, 7 times a week from October 30
• AirAsia X Auckland-Sydney-Kuala Lumpur, 3 times week from November 2
• Air Canada Auckland-Vancouver, 3 to 5 times a week from November 12
• Emirates Auckland-Dubai (non-stop), 7 times a week from December 1
The airline sold its last slots at Heathrow in 2020.