International passengers through Auckland Airport could fall from 11million a year to zero. Photo / Getty
International passengers through Auckland Airport could fall from 11million a year to zero. Photo / Getty
Auckland Airport boss Adrian Littlewood says the company had no choice but to put $2 billion worth of projects on ice.
With international arrivals heading towards zero, the future was too uncertain.
The company first released bold plans for the ''airport of the future'' in 2014, but that 30-year visionwill now be pushed out further because of the impact of the coronavirus pandemic.
"Only a month ago we were making big announcements around the [domestic] jet hub and the arrivals terminal, and having to suspend some of these big projects now is pretty tough."
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The second runway is suspended again. A less dramatic downturn in travel in 2010 led to a pause then. While physical work had not quite started, there have been years of planning and design work and the company was expected to give the project the green light this year, with completion as early as 2028.
Other projects suspended include the Jet Hub, which would have replaced the ageing domestic terminal. After years of negotiations, agreement was close between the airport and airlines on what it would look like. A multi-storey carpark, park & ride south and construction of the 146-room Mercure Hotel near the airport shopping centre are also on ice.
Continuing work on the projects was not feasible, said Littlewood.
"Holding costs alone are tens of millions of dollars with no certainty over restarting them. It is prudent to suspend them formally and restart when we're clearer on the timing."
This has led to 90 contractors involved in the projects being let go at the airport, which is also consulting with a large number of its 500 employees around a proposal to reduce hours and salaries by 20 per cent.
Its board, Littlewood and the leadership team have already agreed to cut their remuneration by 20 per cent.
How quickly can it be restarted?
Littlewood said one "small advantage" was that the plan still stands.
''The plans will be put to one side and left there. We've done a lot of work on the commercial models, around construction, sequencing and logistics.''
However, it would take time to form teams, get contractors on board and re-price the projects.
"I'm pretty sure a lot of that [pricing] would be unconfirmed now. There would be some time to restart but the good thing is that we know what we're doing."
Auckland Airport chief executive Adrian Littlewood. Photo / Ollie Dale
"It is sad, but inevitable in the face of what has happened to the aviation sector with Covid-19," said Board of Airline Representatives (Barnz) executive director Justin Tighe-Umbers.
"The whole sector is reeling from the impact and as well as flights being cancelled, some international airlines have already pulled out of New Zealand. We will be working hard to get them to return once this crisis is over."
Airlines are facing an immediate cashflow crisis, and deferring these projects was critical to assisting with their recovery.
"It is ultimately air travellers that pay a large percentage of these projects through the fees that airports charge airlines. That gets passed on through ticket prices," said Tighe-Umbers.
What's still going ahead?
Littlewood said the airport remained committed to completing a number of key infrastructure projects, including construction works associated with various roading projects and upgrading the runway pavement, which has been deteriorating.
"The runway pavement works have long been planned, and we are absolutely committed to this project and working through the detail of when we complete the works, while maintaining safe and reliable airfield operations."
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The decision to continue with roading work and review its timing for upgrading the main runway pavement is also supported by Barnz.
"What we all have to do is make sure we retain key aviation infrastructure in New Zealand for when we can open up to international travellers again," Tighe-Umbers said.
Auckland Airport is 22 per cent owned by Auckland City and has suspended its dividend payment for the first half of this year.
Littlewood said the company had taken steps to confirm its liquidity position and introduced measures to substantially reduce future operating costs and capital expenditure.
It has unrestricted cash of $340 million and an additional $485m of undrawn bank facilities.
Shares in the airport have plunged from $9.18 at the start of the year to as low as $4.59 last week although have recovered and today were trading at over $6.
