International depature

Investing in the future

As New Zealand’s foremost airport, which represents a vital part of the country’s transport, tourism and trade infrastructure, we must ensure we have the capacity to cater for the needs of future generations by retaining this land.

New aeronautical pricing schedule

A new five-year aeronautical pricing schedule for Auckland Airport was published in early June 2012 following a full and constructive consultation with airline customers. The new schedule features a reduction in average charges per international passenger in the first year, with subsequent increases broadly in line with the expected rate of inflation. 

This reduction in international charges is the first for Auckland Airport since becoming a listed company, and shows how our focus on developing new air-services is benefiting travellers through lower prices. By increasing the number of passengers passing through Auckland Airport, and by keeping a tight hold on our expenditure and driving operational efficiencies, we are now able to spread airport costs over a larger base, and reduce international charges on a per passenger basis.

An increase in domestic charges largely reflects the need to invest in high priority modifications over the next 18 months to expand the capacity of the domestic terminal in the shorter-term, so that it can cope with the increasing size of aircraft being used on main domestic routes. We are continuing consultation with airlines on development of a new terminal to replace the existing domestic terminal. 

New domestic terminal

The new terminal will be a key part of Auckland Airport, the domestic travel experience, and New Zealand’s tourism and trade infrastructure for many years to come, so we firmly believe it’s worth spending a bit more time now getting the plans right. It remains our intention to have the first stage of a new terminal facility operational in time to accommodate projected growth in domestic travel demand and the introduction of new larger domestic aircraft. 

New regulatory regime

In May 2012, we submitted our first information disclosure for Auckland Airport under the new Commerce Act regulatory regime. Our information disclosure reflected our service ethos of ‘making journeys better’ for consumers, for airlines, and for our business partners. We remain committed to the new information disclosure process and to ensuring that the new regulatory regime is given sufficient time to be fully tested. 

In general, airports are one of the few industry sectors in New Zealand that do not have a significant sector-wide infrastructure deficit. That said, airport infrastructure is very capital intensive and long-lived, and it is essential for New Zealand that airports continue to have appropriate incentives to provide the capacity necessary to ensure there are no growth constraints and to facilitate our country’s ambitions to grow trade and tourism. 

The nature and large scale of some of the capital investment that will be required to accommodate demand growth at Auckland Airport, coupled with the relatively shallow capital pools available in the country, means that we must also be able to raise capital and attract funding from a wide range of sources. Access to global capital is therefore critical to our ability to invest.

The very long-term realities of airport planning and development mean we must continue to hold land for future airport expansion for extended periods. However, the current regulatory framework does not consider it acceptable for airports to reflect the holding costs for such land assets in their charges to airlines, meaning that in many cases this land generates no return to airport shareholders until such time as it becomes operational. 

As New Zealand’s foremost airport, which represents a vital part of the country’s transport, tourism and trade infrastructure, we must ensure we have the capacity to cater for the needs of future generations by retaining this land. This is a national responsibility we cannot, and do not wish to, avoid, but current regulatory settings mean our shareholders are bearing the cost associated with safeguarding future New Zealand aviation capacity.

Growing air services

Our investment in air-service and market development has continued to bear fruit, with a number of successes in developing new, or expanding existing, routes. China Southern Airlines increased their services to daily in November 2011, a key driver of the strong growth of Chinese visitor numbers. Emirates announced a second A380 service via Melbourne. Air New Zealand commenced new seasonal services to Bali and the Sunshine Coast, and expanded existing international services to Perth and Japan, and domestically, to Queenstown. In April 2012, Auckland Airport signed a memorandum of understanding with Garuda Indonesia, which envisages Garuda commencing flights between Indonesia and Auckland sometime in 2013.

On the downside, Aerolineas Argentinas announced that it would be discontinuing its stopover in Auckland. More significantly, Qantas cancelled its Los Angeles service and United Airlines shelved plans to commence a Houston to Auckland service because of a local dispute in Houston regarding a second international airport. 

While disappointing, the United Airlines decision in relation to Houston has been offset by other airline commitments to the important United States market. Air New Zealand is increasing its Honolulu capacity during the peak season, and has expanded its Los Angeles service. In July 2012, Hawaiian Airlines announced plans to fly three times a week from Auckland to Honolulu direct from March 2013, in the process offering 11 onward connections to mainland United States cities including Las Vegas, San Diego and New York.

Auckland Airport Business District

While the core of our business always remains the movement of people and goods, the efficient use of land becomes ever more important as the airport grows. Since 2010, we have had a coherent land development vision, centred on an Auckland Airport Business District that provides a framework to maximise land use.

The 2012 financial year saw a number of important property projects progress, including a very positive first year of trading for the new Novotel Auckland Airport, good performance at another Accor-operated hotel (Formule 1), and the opening of Abbeville Estate, a heritage function centre. Other completed projects include a new Toll warehouse, a logistics centre for CEVA Logistics and a training centre for tourism and travel education purposes. In addition a high-quality office building, that now houses the corporate office for Auckland Airport, was completed in July 2012.

However, we do note that a relatively flat Auckland commercial property market has meant that development activity across the region has slowed, in turn slowing the rate of growth at the Auckland Airport Business District. 

We have continued to focus on improving the amenities at the Auckland Airport Business District, providing a place and an environment that is more attractive to the many businesses that want to locate close to the massive movement of people and goods that the airport facilitates. New amenities include restaurants, cafes, pubs, a gym and recreational facilities such as paintball and a high ropes course. 

Another exciting initiative has been the careful restoration of a number of historic buildings into a heritage function centre. Abbeville Estate is set in a lush, landscaped country setting with views across fields and beautiful gardens. The venue is an ideal place to host weddings, corporate functions, sales conferences, product launches, celebrations and team building events.

It’s all part of the Auckland Airport strategy to make the Auckland Airport Business District a world-class business location, right next to the biggest travel hub in the country.

Retail environment

The international terminal retail space that was significantly redeveloped over 18 months ago is continuing to receive great customer feedback and generate excellent results, contributing to an 8.7% increase in total retail revenue on last year.

Our retail environment reflects a mix of quality international and New Zealand brands, from luxury to boutique. New Zealand brands include Bennetts Chocolate and the first New Zealand retail space for the renowned fragrance and body care brand Ecoya, shared with its sister company, New Zealand’s leading skin care brand, Trilogy. Passengers have also responded well to some innovative ‘pop-up’ retail offers, including a number of Australasian product launches.