NEW ZEALAND. Auckland Airport today posted its results for the financial year ended 30 June, noting that the last six months had been the most challenging in the company’s history.
Total retail income for the 2020 financial year fell by -37.3% or NZ$84.3 million (US$55.3 million) to NZ$141.5 million (US$92.9 million). Retail income per international passenger dropped -14.9% to NZ$17.45 (US$11.45). This decline was driven by support offered to airport tenants during the COVID-19-related travel restriction.
Total airport revenue dropped -23.7% year-on-year to NZ$567 million (US$372 million) as passenger traffic declined by -26.5% to 15.5 million. International passenger numbers (including transit) reached 8.5 million and domestic 7 million.
Operating EBITDAFI slumped -53.1% to NZ$260.4 million (US$ 170.92 million) with reported profit after tax down -63% to NZ$193.9 million (US$127.2 million). Earnings per share fell -64.5% to 15.2 cents and underlying earnings per share decreased -34.7% to 14.7 cents.
Chief Executive Adrian Littlewood said the 2020 financial year had been dramatically split in two. “The first half of the year saw Auckland Airport embark upon a series of ambitious infrastructure projects which were transforming our precinct into an airport of the future,” he said. “The second half of the financial year brought a global pandemic and international tourism in New Zealand to a virtual halt.”
“The reduction in traffic has heavily impacted revenue across business, but primarily in the passenger-connected parts of aeronautical, retail, transport and hotels business,” Auckland Airport said. “In addition, we have also seen a secondary impact of the travel restrictions on tenants in the airport’s investment property division that are directly linked to passenger movements, e.g. rental cars.”
Ecommerce fares best
The bright light within retail was The Mall, Auckland Airport’s online duty and tax free shopping platform, now in its second year of trading. International travellers can now purchase and collect any item from the full online catalogue as they depart or arrive at the airport. The Mall sales increased by +90% year-on-year with transactions rising by +37%.
In December 2019, Auckland Airport further extended its retail reach through digital channels. This provided the ability for customers to order and have items directly shipped to them in Mainland China. The airport’s loyalty programme, Strata Club, reached another important milestone with in excess of 275,000 members in 2020, an increase of over +25% year-on-year. The programme ties the airport’s retail, lounge and parking products together to enable cross-purchasing through the provision of tailored offers to members.
During the elevated COVID-19 alert levels, the majority of stores in both terminals were temporarily closed. As New Zealand moved into Alert Level 1, domestic retailers gradually reopened to service the increasing number of travellers. Reflecting the current border restrictions, the majority of retailers within the international terminal still remain closed due to the low number of travellers arriving or leaving the country.
PSR rates hold up
Both international passenger spend rate (PSR) and domestic PSR held relatively stable during the 2020 financial year. The completion of the airport’s food & beverage offering in the international terminal resulted in an +8.1% increase in PSR.
What the airport called the “constantly improving” duty free offerings led to growth in the PSR of +11.4%, +2.4% and +1.2% for the electronics, cosmetics/skincare, and liquor categories respectively, while wines decreased by -5.8%. Growth in these areas offset the decline in categories such as destination, luxury and specialty.
Earlier investments such as Strata loyalty and online retail to future proof and scale the consumer business has enabled the airport to test new channels for retailers post-COVID focusing on the domestic market.
The company has developed a new domestic option (pictured below) for online channel The Mall to enable contactless/click-and-collect shopping, providing customers with access to travel retail exclusive products. Auckland Airport has also launched a pop-up tax paid store for duty free retailers and is about to launch a domestic collection point to provide a terminal pick-up point for tax paid goods and a channel to airport retailers outside of the terminal.
Health and safety first
Littlewood said, “Throughout this time, we have remained focused on the health and safety of our people, passengers and other front line staff, working with border agencies and the Ministry of Health to protect New Zealand against the spread of COVID-19.
“We have also played a critical role in keeping New Zealand connected to the world, continuing to maintain safe and secure airfield operations as the pandemic took hold. Our team is proud to have supported 115 repatriation flights and we have worked alongside our airline customers to keep trade links alive, ensuring the ongoing flow of critical cargo supplies and the export of high-value Kiwi goods.”
Littlewood said that due to the significant fall in passenger numbers and the scaling back of the infrastructure development programme, Auckland Airport had made the difficult decision to reduce its workforce. As at 30 June these changes had resulted in a -25% reduction in the number of staff and contractors employed by Auckland Airport.
“It goes without saying that it’s been an extraordinarily difficult time for our team,” he commented. “Unfortunately, we’re not alone and recognise that many of the organisations that operate alongside us at Auckland Airport have suffered major job losses, including our retail and airline partners and companies that supply services at the airport.”
“The last six months have been the most challenging of Auckland Airport’s 54-year history” – Auckland Airport Chair Patrick Strange
Respond, Recover, Accelerate
In April, Auckland Airport carried out a successful NZ$1.2 billion (US$790 million) equity raise to reinforce the company’s balance sheet during the crisis, and a new strategic plan – dubbed Respond, Recover, Accelerate – has been developed.
“As we look to the 2021 financial year, we continue to face significant uncertainty on the timing of Auckland Airport’s recovery,” Littlewood said. “Our financial performance is strongly linked to international arrivals and departures, and while there is no doubt international travel will recover, there is not yet any consensus how and when that will unfold.
“With so much uncertainty, we think it prudent at this time to adopt more conservative planning assumptions than either the International Air Travel Association (IATA) or Standard & Poor’s, which are forecasting a full recovery of international travel in approximately three years. At this stage, we think a full recovery could take longer.
“However, we are hopeful that domestic travel will return to normal comfortably within two years. With Australia being our largest international market, we are also hopeful that short-haul Tasman and Pacific Island travel will resume sometime in 2021, with a full recovery of both these markets occurring before long-haul international travel returns to normal.
Auckland Airport Chair Patrick Strange said: “The last six months have been the most challenging of Auckland Airport’s 54-year history. The global pandemic and the extremely difficult aviation and tourism operating conditions we have seen over the past six months are far from over.
“But we have worked quickly to respond with our sights set firmly on our future. The long-term fundamentals of our business remain strong and we have taken steps to ensure we remain resilient and well positioned for a recovery as demand for international travel returns.”
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