Auckland Airport: Isolation-free travel the key to recovery

Auckland Airport says ongoing uncertainty about the recovery of domestic and international travel means it is forecasting an underlying after-tax loss of between $25 million and $50m for the full financial year.

Today it reported
its third consecutive half-year underlying loss, of $11.5m for the six months to December 3, down 21 per cent from the same period a year ago. Passenger numbers were down nearly 40 per cent to 1.7 million.

Chief executive Carrie Hurihanganui said the outlook was “lumpy’ but she was optimistic.

On Monday the New Zealand border will reopen to vaccinated New Zealanders arriving from Australia, with a further reopening to vaccinated New Zealanders from other parts of the world from March 13.

“While the isolation requirement will restrict demand to just those who have the time and ability to self-isolate, it will come as a huge relief for families divided during times of celebration or grief, or those who simply want to return to their homeland,” she said.

Vaccinated tourists from Australia and other visa waiver countries must wait until July to enter the country and Hurihanganui said the current isolation requirement was a deterrent.

“If someone’s going to travel here for two weeks, they’re not going to be willing to spend seven days of that in isolation.”

The airport believes the requirement for mandatory self-isolation will dampen international demand over the rest of the financial year, with Tasman passenger numbers somewhere between 10 and 30 per cent of pre-Covid levels, and long-haul international passenger numbers unlikely to exceed 5 per cent of past levels.

New Zealand’s community Omicron outbreak will cap the domestic passenger recovery at somewhere between 45 per cent to 90 per cent of pre-Covid levels over the rest of the financial year.

Airlines that the airport was talking to were interested in returning or stepping up current services, but the isolation requirement was a problem for them.

“Certainly airlines are looking to return this calendar year but they keep seeking clarity around restrictions such as isolation. I think they’re poised and ready but they’re just looking for a trigger that they can plan around,” she told the Herald.

High rates of Covid transmission in the community reduced the need for restrictions at the border, she said.

While vaccination, mask use, social distancing and hygiene would remain important, she said border measures were not as relevant as they used to be.

Domestic traveller volume during the half-year was hit by outbreaks of Covid-19 in the community, with passenger numbers falling to just a few hundred a day during Auckland’s lockdown, from around 90 per cent of pre-Covid levels in July.

“We anticipate it will take time for confidence in domestic travel to rebuild back to those levels again,” said Hurihanganui.

She said the airport’s 400-strong workforce hadn’t yet been too badly affected by Omicron.

The airport had done scenario planning and introduced additional health and safety measures, including the establishment of work bubbles and using high-frequency rapid antigen testing alongside PCR surveillance testing for selected frontline workforces.

While the aeronautical arm suffered, the property business continued to grow strongly in the six months to December 31, 2021, with occupancy remaining at 98.5 per cent and a solid development pipeline from both new and existing tenants.

In November 2021, Auckland Airport (in partnership with Tainui Group Holdings) committed to restarting construction on the Te Arikinui Pullman Auckland Airport Hotel, expected to be completed in 2024.

Design work and pre-development planning is well underway for a 100-store fashion outlet centre to be built on the northeastern edge of the airport precinct, with enabling works to begin shortly.

“We’ve continued to field strong interest from tenants including several major international brands, reinforcing for us that there is substantial demand from customers for a development of this nature in New Zealand,” said Hurihanganui.

The airport continues to provide rent relief.

“With international travel restrictions and regional lockdowns continuing to challenge our retailers, 92 per cent of in-terminal retail rental income was abated during the six months to December 31.”

During the last six months the company completed $33m in roading improvements to its 40km core roading network, widening and creating new roads, adding high-occupancy vehicle lanes and improving pedestrian and cycle paths.

On the airfield, a further $28m in upgrades were carried out to pavement, ground lighting and the underground fuel network.

“We are also reconfirming capital expenditure guidance for the 2022…