Low airfares prove a boon for airport

Auckland International Airport shares slipped yesterday after the country's busiest airport forecast a slimmer-than-expected profit for next year.

Shares closed the day at $2.18, down 6c.

Chief executive Don Huse forecast an after-tax surplus of $100 million or more for the 2006 year.

The projected surplus includes $8 million in interest costs, the result of a boost in debt that the company took on to make hefty payments to stock holders.

Next-year projections fell short of analysts' mean estimates of $113 million quoted on Bloomberg.

"The commentary on next year's earnings will disappoint but, obviously, reflects the extra interest costs and higher depreciation going forward," said James Lindsay, equity manager of Tyndall Investment Management.

He expected analysts would downgrade earnings for this coming year.

Meanwhile, the airport also reported a 12 per cent boost in full-year net profit, thanks to record passenger growth, especially from international travellers lured by competitive airfares.

Total passengers for the year exceeded 11 million for the first time.

New Zealanders travelled 15 per cent more than last year. Australians showed the second largest traffic increase at 7 per cent. The single biggest drop in passenger traffic was from Singapore with 8.3 per cent, followed by a 4.8 per cent decline in travellers from South Korea.

Chief financial officer Robert Sinclair said meeting the needs of the ballooning passenger base would require significant capital investment of $417 million over the next three years or more. Expenditures a year would be $135 million to $150 million until 2008, exceeding the previous forecast of $125 million.

Lindsay called the capital expenditure guidance "surprising" as it was millions higher than what was previously forecast.

Major new projects include expansion of the international terminal, a new pier at the international terminal, new car park facilities and an upgrade to the domestic terminal.

Airport expansion will bloat interest costs and increase depreciation next year. In the past year, interest costs increased 11 per cent to $36.1 million.

The next phases of construction will build on the significant $128 million expansion the airport has undergone within the past year.

That included the completion of the first stage of a two-stage widening of the main runway, which will allow it to accommodate the A380 airbus next year.

Annual revenue for this year was up 7.7 per cent with a significant rise in such non-aeronautical revenue as car park sales, which rose 27 per cent.

Passenger retail spending fell to $13.17 million from $13.44 million a year earlier as cheaper fares brought in passengers with lower spending habits.