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Auckland Airport Buys Stake In Cairns, Mackay Airports

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Jan 11 NZPA - Auckland Airport is looking to boost international passenger numbers through its Auckland operations on the back of a $A132.8 million ($NZ166m) deal to buy a stake in airports in north Queensland.

The company today announced it was buying a 24.55 percent stake in North Queensland Airports, the operator of Cairns and Mackay airports, which was privatised a year ago. The stake is being bought from Westpac Bank.

Auckland Airport said that within five years the potential benefits were estimated to include at least 100,000 extra passengers per year through Auckland. That would deliver incremental ebitda of $2m to $2.3m.

The deal was likely to have a "small dilutive effect" on Auckland Airport's earnings per share, which would improve as Cairns Airport recovered from a downturn in direct international passenger numbers.

Cairns had more than 1m international passengers in 2007, but that was down to about half that in the 2010 financial year. The decline was partly due to a decline in Japanese visitors.

Auckland Airport chief executive Simon Moutter said his company believed Cairns Airport was well positioned to rebound and would benefit from increasing Asian tourism.

He pointed to Australia's 7 percent a year growth target for Asian visitors, compared to this country's target of 3.8 percent a year, and said Auckland Airport believed work was needed to get this country's performance up to the level of Australia's.

"So we've taken a decision to do something, to become a player in the Australian market. We wanted to acquire a position where we could develop synergistic strategies, get a seat at the table and influence the business, join with strong partners who are influential in other airports of significance to us in Australia, and present a beefed up offering to big foreign airlines, particularly to those from Asia."

The shared tourism goals was the "key driver for this acquisition", Mr Moutter said.

For now, 16 international airlines that stopped on the Australian east coast did not fly on to New Zealand.

"It's really important that we get talking to those airlines, that we're presenting a powerful reason and rationale for them to also include New Zealand on their destination footprint."

Only 10,000 international visitors to Cairns last year flew on to Auckland.

"That sounds like quite a big opportunity to leverage a dual destination tourism proposition," Mr Moutter said.

Auckland Airport was the only airport operator in the new shareholding structure, and its partners would be looking to it for advice and support on operational matters.

The other partners are the JP Morgan Infrastructure Investments Fund with 49.9 percent, The Infrastructure Fund managed by Hastings with 20.12 percent, and Perron Investments -- the investment vehicle of wealthy west coast Australian -- with 5.43 percent.

Auckland Airport said the deal fitted with its "step-out" strategy announced earlier last year.

While the ultimate goal was direct Asian connections with Auckland, an important parallel approach was to strengthen connections with other strategically located airports, the airport said.

Standard & Poor's Ratings Services said the announcement of the deal did not affect Auckland Airport's A-/A-2 ratings and stable outlook.

The stable rating outlook reflected S&P's expectation that Auckland Airport would maintain adequate liquidity following the purchase.

But the deal may reduce the airport's capacity to undertake further sizeable "step-out" opportunities at the current A- rating in the short term, S&P said.

The Cairns Mackay investment will be about 5 percent of Auckland Airport's total assets and is due to settle on Wednesday. It is to initially be financed from existing debt facilities, with a subsequent funding strategy likely to involve a mixture of debt and equity consistent with Auckland Airport's current capital structure.

Mackay Airport had nearly 1m passengers for the year, and is the main airport servicing the Bowen Basin, an important region for natural resources. It also benefits from close proximity to the Whitsunday resort islands.

Auckland Airport shares were down 7c to 201 around mid-afternoon.

NZPA

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