Andre Lovatt, chief infrastructure officer at Auckland Airport. Photo / Brett Phibbs
For Auckland Airport, spending billions of dollars of travellers’ money was always going to be complicated.
At one of the country’s most complex building sites, there’s a list of metaphors that attempt to describe the challenges involved. One previous big build was described as like “making your bed when you’re standing on it”; now the work needed to build a long-overdue new domestic terminal has been compared to “changing a car’s tyre while it’s still moving”.
In March, more than 1.5 million passengers and 13,500 planes passed through the airport, where the longest time the runway is idle is just three hours. But despite the many challenges, spending close to $4 billion on the latest projects – revolving around an integrated domestic terminal – is well underway.
Airlines are worried about the potential for price shocks which could hurt demand, and remain unhappy at how the airport got to pressing “go” on the project, which has ballooned in cost. The airport does have substantial headroom to raise debt, and a capital raise is possible, but the cost will ultimately be paid by passengers through increased charges on tickets.
The airport company says it has no choice but to build and is aiming to have the new integrated terminal completed by 2029. If not for Covid-19, building work would have been well underway already, it says, and the company pushes back on airline claims that the $3.9b spend has been sprung on them.
The Board of Airline Representatives, which represents the airline industry, says passengers, especially those who are most price-conscious, will be discouraged from travelling. For its part, the airport says that this year domestic airport charges were around $7, typically making up 3 to 4 per cent of the cost of an average airfare.
The airport’s 57-year-old domestic terminal is no longer fit for purpose, and will be a part of the new integrated structure.
At 82,000sq m, the new $2.2b integrated building will be three times the size of the old one, and will significantly cut connection times to international flights.
But it’s not just a matter of adding onto the existing international terminal. At what has been described as the “dirtiest of dirty” brown-field sites, $1 billion-plus is being spent on enabling the project.
Andre Lovatt, chief infrastructure officer at Auckland Airport, says what is playing out is a series of high-stakes chess moves as construction costs spiral up.
“We’re operating in an environment where there’s lots of aircraft movements and lots of different parts of the terminal that are absolutely vital to continue to operate the airport. That means that we need to very carefully sequence construction,” he said during a tour of various parts of the airport.
“What that means is lots of different micro-sites that we phase through over the time period.”
In the past, when talking about the new integrated terminal alone, company executives have talked about a $1 billion-plus price tag. Now it’s $2.2b.
What happened?
“When we previously talked about the costs of the domestic processor [the terminal], we said it was a project that was in excess of a billion dollars,” says Lovatt. “Since the time that we did that work, what we’ve seen is further development and evolution of the scope of the project.”
The company has nailed down exactly what it is that it has to build. “But we’re also without doubt building in a time of high inflation, interest rates and also construction inflation.”
That construction inflation was running at about 17 per cent a year, though there were signs this was easing.
“By the time we commence the domestic processor main build in the middle of next year, we’re expecting that to steady out, but one thing we know for sure is that things never get cheaper to build.”
As part of its chess moves, the company has had to move the Transitional Waste Facility (TWF) for rubbish from planes and the Effluent Waste Facility (EWF) - better known as the “honeypot” - for processing septic waste from aircraft. There’s also a new “Checkpoint Charlie” (the transition point from landside to airside, run by Aviation Security) and the livestock facilities have also been moved. All up, those projects have cost $45m.
A eastern baggage processing hall for outbound luggage has had to be demolished and is in the early stages of being rebuilt, fuel systems and other horizontal infrastructure has been ripped up and re-buried, and a massive excavation and paving operation is underway to the north of the airport. This will provide parking space for planes that would otherwise get in the way of the integrated terminal work, and allow for expansion for a second runway.
The area where the new terminal and pier will be built is like an archaeological dig.
“It’s the dirtiest of dirty brown-fields that you can imagine,” says Lovatt. “There’s all manner of surprises in the structures and in the ground. And when you are discovering things when you’ve got a $2 billion construction project underway, that starts getting very expensive and very challenging to deliver that efficiently.”
A combined services trench and utilities work is a multi-year project and has a price tag of $121m.
The airport’s chief customer officer, Scott Tasker, says the demolition of the eastern baggage hall had no impact on the misplaced luggage issue that has plagued the airport and airlines this past summer. The site that was demolished handled outbound bags; the problem with lost bags started at airports overseas.
“The issue with baggage over summer was primarily incoming,” says Tasker.
The new bag processing hall under construction will process both international and domestic baggage, will be less labour-intensive and will allow passengers to check in luggage hours earlier than at present. The old eastern bag hall was always a temporary structure, says Lovatt.
Contractors now have one of the country’s largest tower cranes (it came from Spain) on site, with an 85m boom and a 50-tonne lift capacity to hoist 18m-high pillars for the hall and for the “headhouse” at the terminal end of the domestic pier, where security, offices and airline lounges will be located. Work on what is called the east bag hall will cost about $357m and from there, the 180m-long pier for domestic aircraft will be built.
“We’re going to do some early works this year [on the pier] - things like test piling and finishing off-site preparation,” says Lovatt. “The real main contract ... is expected to be started in the middle of next calendar year.”
The construction there means the “mission-critical” truck dock for inward goods to lounges and shops has to be relocated to the western part of the airport, at a cost of $292m.
“The easiest way to stop operations at the airport is to stop the truck dock,” says Lovatt.
And there’s yet another big complication. As the new domestic pier is built, there is less parking space in the area for aircraft that aren’t at the gates. Freighters also use that space.
Those planes now have to be accommodated elsewhere, and that’s why there has to be a new remote hard stand laid to the north of the international Pier B, the new A380-capable gates completed in 2018.
The new hard stand is one of the biggest and most costly parts of the enabling works underway, although the airport says it can’t divulge the total cost as a commercially sensitive tender is underway. Around a million cubic tonnes of earth is being shifted to create a 20ha area for parking planes.
There’s also another complication for the airport which means the new remote hard stand has had to be accelerated.
Some degraded concrete slabs have been identified in the middle of the existing runway and need replacing by 2028, as did slabs at the ends of the runway when the pandemic hit three years ago.
But today is unlike 2020-21, when work was relatively straightforward as there was little traffic and lightly loaded planes which could operate on a shorter runway.
There is no curfew at Auckland Airport and the longest stretch without planes is overnight on a Sunday, when there is a three-hour window.
The airport will need a full contingency landing strip while the 500mm thick slabs are replaced, and this will be a taxiway in front of the domestic terminal. That means even less parking space for aircraft.
The new hard stand, due for completion late in 2025, fits in with the airport’s long-term plan for a northern runway. If or when that is built, gates can be constructed on the northern face of Pier B.
Work is also well underway on the new $300m transport hub, on the site of the main international carpark, meaning a longer walk for airport users.
About 200 workers are on site.
Close to 1200 piles have been driven and foundations will be finished by the end of April for the multi-level building with five levels of car parking and three storeys of offices. The hub has bus facilities and provision for a future mass transit station.
The new remote stand will provide extra flood protection, something that is top of mind after the international terminal was inundated on January 27.
Lovatt says the project’s 20,000sq m stormwater ponds deliver a giant flood catchment that drains through to the sea in pipes up to 2m in diameter.
“It has water treatment facilities and an emergency spillway, so had that been in place on January 27, it would have averted any flooding that occurred.”
The airport has taken earlier work done on sea level rise and flooding and put it through revised modelling in the wake of this year’s flood. That night, a 7500 cubic metre pond near the terminal exit road overflowed and rushed through the terminal.
“In a normal event there is discharge under the road and then out to sea underneath the terminal.”
Lovatt says the airport also is looking at raising the floor level of the new integrated terminal by 50cm, with ramps leading up to it. Living with the risk of inundation isn’t an option because of the disruption to travel. “Our corporate perspective is that to just let it happen is not an option.”
Deploying sandbags and smart monitoring of pipes and drainage systems are also part of flood defences.
“All of our projects have extensive stormwater and flood mitigation and overall climate change resilience measures built into them,” says Lovatt. “Our job now is to get on and start delivering those improvements and over time, that will result in really significant improvements to the resilience.”
Board of Airline Representatives executive director Cath O’Brien has said she’s limited in what she can say about her members’ stance on the project because of late-stage aeronautical pricing negotiations. However, in her view, the airport sprang the final shape of the plan at short notice.
But the airport says it has been consulting its major airline customers since May 2011 on a replacement for the ageing domestic terminal. Since that time, the airport has discussed 21 concept designs with major airlines.
“We’ve been working really hard for the airlines, over the last two years especially,” says Lovatt.
Once airline consultation is complete, the airport will re-set prices from July 1 for the remaining four years of the pricing period.
Airport chief executive Carrie Hurihanganui said when the $3.9b rebuild was announced last month that the company “recognise that in today’s environment price changes are challenging”.
The airport company was ambitious but mindful of cost, “ensuring our infrastructure programme is fit for purpose”.
While future airline charges will have to increase, they will be coming off a very low base due to the age of the existing domestic terminal.
Auckland Airport will only begin to recover the cost of infrastructure investment once it is commissioned and airport users - airlines and travellers - are enjoying the benefits.
Regional turbo-prop flights will remain in the existing domestic terminal for now, with Auckland Airport currently consulting major airlines and the Board of Airline Representatives on the future location for regional travel.
The airline sold its last slots at Heathrow in 2020.