Ann: ADDRESS: AIA: AIA Auckland Airport Annual Me

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• Summary: ADDRESS: AIA: AIA Auckland Airport Annual Meeting 2012 - Chair's Address
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AIA
24/10/2012 13:52
ADDRESS

REL: 1352 HRS Auckland International Airport Limited

ADDRESS: AIA: AIA Auckland Airport Annual Meeting 2012 - Chair's Address

Media Release | 24 October 2012

Auckland Airport annual meeting Chair's address

Chair's Address

In addressing the annual meeting, I would like to cover the following topics:

o The highlights of the 2012 financial year,
o An update since 30 June 2012,
o Outlook for the next 12 months,

In reflecting on the 2012 financial year, I can confidently say, on behalf of
my fellow directors, that Auckland Airport is, at this time, a
high-performing and successful kiwi business that is increasingly ambitious
about its future and about the economic future of New Zealand.

It was very pleasing to have built on last year's breakout profit result and
deliver an even better financial and operational performance for the
financial year ended 30 June. This was in spite of difficult global economic
conditions and weaknesses in traditional long-haul markets such as Europe.
Those conditions continue to challenge most businesses, including those in
tourism, trade and aviation sectors.

Our underlying profit after taxation was up 15.0% to $139.025 million, whilst
our "headline" total profit after tax was up 41.2% to $142.284 million. The
improved result in underlying profit was largely fuelled by growth in
passenger numbers across our airport interests. At Auckland Airport, total
international passenger movements, including transits, were up 5.1%, and
total domestic passenger movements were up 3.3%.

Passenger numbers also continued to grow at our other airport interests, with
Queenstown's international passenger movements up an excellent 21.2% and
domestic passenger movements up 11.6%. At Cairns Airport, international
passenger movements grew by 3.5% while domestic passenger movements were up
3.2%. Mackay Airport, which is part of our North Queensland Airports
investment, also continued its good growth on the back of the resource
sector, with passenger movements up 7.7%. This growth in passenger numbers
was reflected in the financial performance of our airport investments with
NQA and Queenstown delivering double digit growth in operating EBITDAF.

While there are clearly more people travelling to and from New Zealand than
ever before, a closer look at the statistics reveals a fundamental shift in
global travel demographics. Strong growth is occurring out of Australia,
China, and many other South-East Asian nations, with declining travel numbers
out of the United Kingdom, Europe, Japan and the United States.

Although some of this decline is related to air service capacity much of it
is due to underlying global economic factors that show little sign of
reversing in the near term. This reinforces the need for the Company and the
country to adapt. Our proactive route development strategy has delivered real
benefits in the financial year under review, showcased by the growth achieved
through the direct air-links into Asia. I will speak more on this topic
shortly.

Our focus on, and pride in, 'making journeys better' was again recognised in
the World Skytrax Airport Awards, with Auckland Airport awarded the best
airport in Australia Pacific for the 4th year in a row, and named 2nd best in
the world for airports with between 10 to 20 million passengers annually.

The 2012 financial result offers further evidence of the merits of the
long-term growth strategy and market focus that has driven our approach over
the last few years.  Looking back, we believe that our 2009 'Flight Path for
Growth' strategy set the right foundation. At that time, with the global
financial crisis in full swing, we were faced with a stark choice; to either
'hunker down' or go for growth. We decided then we had to strive for growth,
and not be constrained by a sole focus on protection against downside risk.
Since then, while our strategy has continued to evolve, that underlying
principle of ambition for growth, even in turbulent times, has continued to
fuel our success.

While airline customers, passengers and New Zealand economic interests have
benefited, shareholders have also been rewarded by these efforts, with
outstanding FY10, FY11 and FY12 total shareholder returns, and an increase in
dividends for the past two financial years.

After careful consideration of the capital structure of the business, and as
a signal of our confidence in our long-term prospects, our cash generation
and our ability to fund growth aspirations, the Board has changed its
dividend policy from paying 90% of net profit after tax to paying 100% of net
profit after tax (excluding unrealised gains and losses arising from property
revaluations, or treasury instruments and other one-off items).

As a result of the lift in financial performance and the change in dividend
policy, the total dividends paid to shareholders for the year increased by
20.7% to 10.5 cents per share, with a final dividend of 6.1 cents per share.
I also note that subsequent to the dividend policy change Standard & Poor's
revised its outlook on Auckland Airport to positive from stable.

Now - to what has been happening since balance date, 30 June 2012. For the
first three months of this, the new financial year, international passenger
movements at Auckland (excluding transits and transfers) were relatively
flat, down 0.1% on the prior period to 1.732 million. Domestic passenger
movements at Auckland were up 3.2% to 1.593 million, while total aircraft
movements were flat for the three-month period.

At Cairns & Mackay Airport, where we hold a 24.55% shareholding international
passengers through Cairns were down 9.2% to 170,000, while domestic growth
was strong, up 8.0% to 970,000. Domestic growth at Mackay was up 1.9% to
290,000. At Queenstown Airport where we hold a 24.99% interest, strong growth
continued with international up 9.8% to 93,000, and domestic up an
outstanding 26.4% to 247,000 passengers.

If anything, the global market shifts that we noted in FY12 have actually
accelerated in the first quarter this financial year. Visitor trends indicate
that 'traditional' tourism markets such as Europe and United Kingdom remain
firmly in decline, with only China, Australia and latterly India, currently
growing. And with the strong growth 12 months ago out of European rugby
playing nations now being lapped, the picture becomes even starker.

Global markets are now increasingly Asia-centric and likely to become more
so. A global race is now on to capture value from the massive rise in the
Asian middle-class that is projected. However, New Zealand's visitor
industry, because of its remote location and small scale, is actually
disadvantaged in global terms, despite its powerful brand appeal.

At Auckland Airport, we are determined to play our part in growing travel,
trade and tourism for the markets we serve. We are now acknowledged as
leaders in the tourism industry and we believe New Zealand Inc. is well
served by the collaborative approach the industry is taking on maximising New
Zealand's opportunities as we shift our focus to the Asian market. That focus
has seen our arrivals from China increasing 31% over the last 12 months. I
would again acknowledge the support we receive in this regard from the Prime
Minister as Minister of Tourism, other government Ministers, the tourism
agencies and our airline partners.

These sorts of dynamics have led Auckland Airport to carefully assess the
tourism and trade challenges and opportunities that we collectively face as a
nation, and to consider the significant potential for both the Company and
New Zealand's economy should we be able to fulfil our aspirations.

At this point, Auckland Airport remains broadly on track to achieve all of
its main forecasted value drivers for the 2013 financial year.

I also wanted to update you on one of our key responsibilities as a Board,
and that is the appointment of a new chief executive to replace Simon
Moutter. The recruitment process is rigorous and comprehensive and we are
confident that that process will ensure we find a worthy replacement for
Simon Moutter. And I should formally thank Simon for his four years exemplary
service as CEO of the Company. Simon repositioned the business for the
future, created enormous value and he has left a very positive legacy,
including a fantastic team of direct reports who are ensuring the business
doesn't miss a beat in this interregnum period. I particularly want to thank
Simon Robertson for his leadership of the business during this time.

Looking ahead, as I said we intend to shortly finalise the appointment of a
new chief executive and then assist their transition into that role. We also
intend to confirm, alongside our airline partners, a clear pathway for
finalising our master plan for airfield and terminal development in order to
uncap long-term visitor growth potential. This will involve confirming the
timing of the delivery of an eventual new terminal facility, particularly for
domestic travel. We are also implementing some short-term fixes at the
existing domestic terminal to improve some of its constraints while we work
on delivering the best long-term solution.

Our master-planning activity must work closely with Auckland City planning.
Auckland Airport is a key infrastructure asset for the country and it is
absolutely critical that collectively we get it right. Examples such as
London and Sydney illustrate the consequences where planners over time have
allowed their city to enclose their airports and constrain their capacity for
future growth. This is forcing cities to contemplate spending ratepayer or
taxpayer money - in the tens of billions - on new airports to cope with the
inevitable rise in travel and trade demand. For example, recent estimates
suggest a proposed new Thames Estuary airport in London could cost the
equivalent of NZ$100 billion. The economic and opportunity cost to Auckland
and New Zealand would be massive if aviation capacity was constrained in a
similar way.

I mentioned our role in the tourism industry earlier. We want to maintain our
strong leadership role and push for an even bigger slice for New Zealand of
the new global tourism growth action in order to maintain long-term momentum.
From that perspective, it makes a lot of sense to focus more of our efforts
where the future growth is much more likely to come from, which we believe is
Asia, Australia and the Americas. And it's not just about the raw numbers -
what we know for example is that Australia does a far better job of creating
value per capita from visitors from China than New Zealand does.

Auckland Airport's goal is to enhance our economic contribution as much as
possible and to unlock the constraints on our ability to do that. We will
keep looking for ways to tap into new opportunities as a means of increasing
New Zealand's share of growth from these expanding markets.

In terms of our financial performance for the current year, the board remains
optimistic about FY13 and as previously indicated expects net profit after
tax (excluding any fair value changes and other one-off items) to be between
$143.0 million and $150.0 million.

We note with some caution any potential long-term implications from the
prevailing volatility in global economies. As always therefore, this guidance
is subject to any other material adverse events, significant one-off
expenses, non-cash fair value changes to property and further deterioration
due to the global market conditions or other unforeseeable circumstances.

On behalf of the Board I'd like to again acknowledge the outstanding work of
Simon and the rest of the executive team. They have worked relentlessly to
create value for shareholders and for the New Zealand economy and their
efforts are bearing fruit across the business. I would also like to
acknowledge all of our wider team at Auckland Airport. They do a superb job
24/7, week in week out and it is a privilege as a board to support them in
their roles. I'd also like to thank my fellow directors for their dedication
to their roles, and their support for me as Chair.

During the year we sadly lost Lloyd Morrison and I would like to take the
opportunity to acknowledge him. A Director since 2007, Lloyd challenged our
thinking and inspired debate on many important issues. He was passionate and
aspirational about Auckland Airport and its role in New Zealand, and in many
ways he was an extraordinary New Zealander. Lloyd was relentless in his
pursuit of excellence in everything he did, and we are committed to honouring
that philosophy.

We were also deeply saddened on Monday to learn of the death of another of
our former colleagues Sir Wilson Whineray. Sir Wilson retired from our board
in October 2005 but I remember well his counsel and support and his unfailing
commitment to make sure Auckland Airport remained future focused, growth
orientated and always able to accommodate the next generation of aircraft.
What you see today at Auckland Airport is part of his legacy.

I would also like to take this opportunity to signal to shareholders my
intention to retire from the Board at the next Annual Meeting in October
2013. I have served on this board since 1997 and I am very confident that we
have robust succession options around our Board table to fill the Chair
position. My focus on the intervening 12 months will be appointing and
assisting the new CEO into their role, and ensuring that we maintain the
organisational momentum that this great New Zealand business is delivering.

ENDS

For further information, please contact:

Richard Llewellyn
Corporate Relations Manager
Auckland Airport
+64 (0) 9 255 9089
+64 (0) 27 477 6120
www.aucklandairport.co.nz
End CA:00228806 For:AIA    Type:ADDRESS    Time:2012-10-24 13:52:21