Turbulent times force rethink at airport

Auckland Airport may look at rejigging pricing for airlines. Photo / Dean Purcell

Auckland Airport faces uncertainty over a portion of its revenue as airlines battle to maintain some long-haul services.

The airport's chief executive, Simon Moutter, said more than one airline was facing severe difficulties.

"Our airline customers are under severe pressure - we just can't rely on the passenger growth we've had over many decades. The future is a bit uncertain - how big a dip Auckland will have and how long we will have a dip in passenger volumes," he said during an investor presentation yesterday.

"We don't have a view about the timeline to market recovery."

The airport company's priorities included retaining a firm lid on capital spending and support of short-haul services in particular.

Rejigging pricing for airlines, such as offering off-peak fees or discounts for not using airbridges, was being investigated although flexibility was difficult within traditional rigid charging structures.

Moutter outlined areas where the airport was not performing well, including several years of flat profits, despite revenue growth. Passenger growth rates at Auckland had lagged behind international figures and the retail offering was off the pace, particularly in the departure area.

Property performance had been mixed, management of its existing portfolio was fine but there had been "no big deal wins" in the past few years.

Moutter, who took over as chief executive last August, said commercial relationships with airlines and other business partners "could well be stronger".

Moutter said the "Flightpath for Growth" strategy document unveiled was short on detail as it was a work in progress and more information would be released later this year.

The company said it would reduce capacity-related capital spending in the aero division to a bare minimum. And it would invest carefully in opportunities for its retail and property divisions. Resources would be applied to route retention, route development, tourism promotion and cargo which was at 50 per cent capacity.

The second phase would see investment in the aero division when growth signals returned, and strong investment in retail and property division opportunities.

Moutter talked about investigating "step-out" opportunities - beyond the confines of the airport's business and boundaries.

Such investments were unlikely to represent more than 5 per cent of total assets in the next three years and could include investing or management deals with other airports, off-site property investment or freight and logistics opportunities.

Standard & Poor's Ratings Services left its A/A-1 corporate credit ratings and negative outlook on the airport company unchanged.

"The strategy is consistent with our expectations that the airport will reconfigure its forecast capital expenditure and concentrate on core activities to strengthen its financial profile," S&P said.

"Important to the rating outlook will be how the airport implements today's announced strategy, including its funding, its aggressiveness in the pursuit of growth opportunities, and the strategy's impact on the airport's financial metrics."

Auckland Airport shares closed up 1c at $1.71.

- additional reporting NZPA