Flight simulation of what pilots will see while the runway works at Auckland Airport are underway. Video / Supplied
Auckland Airport's after tax profit has plunged 63 per cent to $193.9 million on a 53 per cent fall in operating earnings.
The company's chairman Patrick Strange said the past six months have been the most challenging of Auckland Airport's 54-year history. The recovery in international travel could be more than three years away, the company says.
"The global pandemic and the extremely difficult aviation and tourism operating conditions we have seen over the past six months are far from over.
Total number of passengers decreased to 15.5 million, down 26.5 per cent on the previous year. International passenger numbers (including transits) were 8.5 million while domestic passenger numbers were 7 million
Strange said the company had worked quickly to respond with its sights set firmly on our future.
Underlying profit after tax was down 31.4 per cent to $188.5m while earnings per share was down 64.5 per cent to 15.2 cents per share and underlying earnings per share was also down 34.7 per cent to 14.7 cents per share.
Revenue was down 23.7 per cent to $567m and in accordance with an agreement with lenders no final dividend will be paid.
Prior to release of the result consensus average revenue forecasts were in the region of $574m, Ebit $282m and after tax profit $170m.
Chief executive Adrian Littlewood said the 2020 financial year had been dramatically split in two.
"The first half of the year saw Auckland Airport embark upon a series of ambitious infrastructure projects which were transforming our precinct into an airport of the future. The second half of the financial year brought a global pandemic and international tourism in New Zealand to a virtual halt."
Littlewood said that due to the significant fall in passenger numbers and the scaling back of the organisation's infrastructure development programme, Auckland Airport had made the difficult decision to reduce the size of its workforce.
As at June 30 these changes had resulted in a 25 per cent reduction in the number of staff and contractors employed by Auckland Airport. It now employs about 500 people.
Littlewood said the airport had played a critical role in keeping New Zealand connected to the world, as the pandemic took hold.
There had been 115 repatriation flights and airlines had kept trade links alive, ensuring the ongoing flow of critical cargo supplies and the export of high-value Kiwi goods.
In contrast to its travel-linked businesses, Auckland Airport's investment property business performed strongly throughout the 2020 financial year.
This resulted in the investment property annual rent roll increasing 4 per cent to $104m and the portfolio value rising 17 per cent to $2.04 billion during the period.
"As we look to the 2021 financial year, we continue to face significant uncertainty on the timing of Auckland Airport's recovery. Our financial performance is strongly linked to international arrivals and departures, and while there is no doubt international travel will recover, there is not yet any consensus how and when that will unfold.''
It was ''prudent'' at this time to adopt more conservative planning assumptions than either the International Air Travel Association (IATA) or Standard & Poor's, which are forecasting a full recovery of international travel in approximately three years.
The company believed a full recovery could take longer.
''However, we are hopeful that domestic travel will return to normal comfortably within two years. With Australia being our largest international market, we are also hopeful that short-haul Tasman and Pacific Island travel will resume sometime in 2021.''
A full recovery of both these markets would occur before long-haul international travel returned to normal.
Because of the high uncertainty around the recovery of international passengers and its strong impact on our commercial performance, combined with the return of nationwide restrictions on people movement due to Covid-19 the company has suspended underlying earnings guidance for the 2021 financial year.
"We will reassess this decision at the October annual meeting and again at our interim results in February 2021."
He said Auckland Airport's capital investment in the 2021 financial year will be focused on advancing existing roading infrastructure projects; delivering core airfield renewals such as slab replacement and apron works; upgrades to the baggage system; and completing pre-leased property developments.
Capital expenditure for the 2021 financial year is expected to be between $250m and $300m.
In April the airport strengthened its balance sheet and raised $1b, fully underwritten, share placement as well as a $200m share purchase plan.
Auckland Council, which held a 22.4 per cent stake in the company, didn't take part in the capital raising and has since seen its shareholding fall to 19 per cent and missed out in the appreciation of the share price.
The airport had a policy of paying 100 per cent of underlying net profit after tax but these will be suspended until 2023 under an agreement with its lenders. The company has more than 44,000 small shareholders with less than 10,000 shares who are attracted to its generous dividend policy.
Forsyth Barr analysts said last month it could be the 2025 financial year before international passenger numbers return to 2019 levels.
The airport typically generates 4.5 times the income from an international passenger than domestic passengers.
Boeing 777s parked up at Auckland International Airport during the pandemic. Photo / Dean Purcell
The analysis found the company's enterprise value had fallen by about 40 per cent from its peak in mid-2019, and about 30 per cent at the start of this year before the pandemic hit aviation.
Auckland Airport shares closed last night at $6.39, up 11c on their previous close. Shares started the year at $9.18 before hitting a low of $4.26 in late March when the impact of border closures became clear.
In June Auckland Airport total passenger volumes decreased by 84.9 per cent compared to last year. International passengers were down 97 per cent and domestic passengers were down by 70.9 per cent.
