June 19, 2008

Slowdown ‘Will Hurt Airports’

By JANES, Andrew

The carnage in the airline sector looks likely to result in a tougher 2008/09 for New Zealand's major airports.

Both Air New Zealand and Qantas have signalled they will cut capacity on long-haul routes due to sky-rocketing jet-fuel prices. While airlines will bear the brunt of the fuel-price spike there will be some flow-on effect to airports, particularly Auckland International Airport, in terms of less passenger throughput, say analysts and fund managers.

"Particularly when combined with an economic downturn it's bound to have an impact on passengers through Auckland airport," said Simon Botherway, the executive chairman of airport shareholder Brook Asset Management. It will largely be dependent on what happens to jet-fuel prices, he said. "In the short term (2008/09) holding passenger numbers flat would be a reasonable outcome."

First NZ Capital analyst Rob Bode said it was a quite altered environment from a few months ago. "Everyone will need to soften their estimates (of AIA's 2008/09 earnings). It's not just in relationship to capacity but also to the economic growth outlook."

Auckland International Airport is expected to post an after- tax profit of around $100 million for 2007/08. For 2008/09 the market was looking at a gain of around 4 per cent plus but recent trends point to 1-2% with downside risk to that, Bode said.

While most of the impact would be felt on long-haul routes, domestic traffic would also be impacted by the economic downturn, he said.

(c) 2008 Press, The; Christchurch, New Zealand. Provided by ProQuest Information and Learning. All rights Reserved.