Auckland Airport sees growth in luring Asian travellers, tapping landbank

Auckland International Airport [NZX: AIA] aims to grow earnings by up to 11 percent next year in a four-pronged plan that includes a coordinated effort to attract Asian visitors to New Zealand and develop the gateway's land bank into the country's "greatest" business hub.

The airport is forecasting underlying earnings of between $160 million and $170 million in the 2014 financial year, up from $153.8 million in the 12 months ended June 30. To achieve that, new chief executive Adrian Littlewood says the airport has embarked on a new five-year strategy of tourism marketing, bolstering its consumer business, sharpening up productivity, and rolling out some new investment, such as developing its extensive property holdings.

At an investor briefing, Littlewood said property development has been a "really tough" market over the past five years. Auckland Airport has set aside about 300 hectares of its 1,500 hectares of available land for commercial development in a 30-year plan, Littlewood told BusinessDesk.

"More clients we talk to want a lot more proximity to the airport," Littlewood said. "And the more the city grows, the closer it gets to the airport."

The airport's investment property portfolio was valued at $635.9 million as at June 30, up from $579.8 million a year earlier, and the unit delivered a 13 percent lift in earnings before interest, tax, depreciation and amortisation of $34.6 million on a 12 percent gain in revenue to $45.9 million.

Mark Lister, head of private wealth research at Craigs Investment Partners, said the airport's property development interests deliver a more diverse revenue stream that isn't subject to the same regulation as its traditional business.

"There's a real strategic advantage to that side of the business," Lister said. "It provides them flexibility and diversifies away from the part of the business that they have to look a little more at government rules."

Last month the airport got a clean bill of health from the Commerce Commission in its information disclosure report, which checks whether airports with a monopoly position are extracting excessive profits. The antitrust regulator deemed its projected 8 percent annual return between 2013 and 2017 was within the tolerated band.

Littlewood told BusinessDesk the airport operator is seeing signs of life in international passenger movements, which slipped 0.2 percent in the 12 months ended June 30, including transits. Government figures today showed visitor arrivals rose 6 percent in July from a year earlier to a record for that month.

The airport's aeronautical unit lifted EBITDA 4.8 percent to $156.3 million on a 3.7 percent gain in revenue to $222.5 million. That amounts to about half the company's sales and 45 percent of earnings.

Because New Zealand is a relatively small market with few leading tourism operators, Auckland Airport is taking a lead role in trying to attract international visitors, Littlewood said.

The gateway has been working with Immigration New Zealand to make it easier for Chinese travellers to get a visa, and it has linked up with Chinese social media platform Sina Weibo in a bid to turn browsing interest in visiting New Zealand into actual sales.

Auckland Airport today reported a lift in net profit to $178 million, or 13.5 cents per share, in the 12 months ended June 30 from $142.3 million, or 10.8 cents, a year earlier. That beat First NZ Capital's forecast profit of $155.6 million.

The shares gained 0.9 percent to $3.28 and have climbed 22 percent this year, outpacing an 11 percent gain on the benchmark NZX 50 index.

(BusinessDesk)