AIA Annual Meeting – Chair and Chief Executive Addresses

Market Release | 23 October 2019

2019 Annual Meeting: Chair and Chief
Executive’s addresses


Patrick Strange, Chair
Overview
Tēnā koutou, tēnā koutou, tēnā tatou katoa.
Welcome to Auckland Airport’s annual meeting.
During the past year we have made real progress on our 30-year vision to build an
airport of the future. Our investments in services and infrastructure helped deliver
several significant milestones in the 2019 financial year.
The completion of the redevelopment of the departure area at the International
Terminal was a particular highlight, making it a place where travellers can shop, eat
and relax. Work is now well underway on two more of our eight key anchor
infrastructure projects – and Adrian will share more on these and other performance
milestones shortly.
Our infrastructure programme is complex and far-reaching. It is a major transformation
of our airport to position us for the coming decades. Ultimately it will mean a smoother,
more unique experience for our travellers and a fitting northern gateway for Aotearoa,
New Zealand.

It will also ensure that we remain a competitive, efficient airport for years to come, and
that we strengthen New Zealand’s connections to the world. And it will enable the
sustainable growth ambitions of our country’s trade and tourism sectors.
Today I will update you on our investment and development plans, before providing
guidance for the year ahead. First though, a summary of our performance highlights.
Performance highlights
Our financial results tell the story of a company achieving consistent returns during a
period of significant transformation.
2019 was a solid year for Auckland Airport, with revenue up 8.7 per cent to $743.4
million.
The total number of travellers passing through Auckland Airport increased to 21.1
million, up 2.8 per cent on the previous year.
One of our key measures of financial performance - operating earnings before interest,
taxation, depreciation, fair value adjustments and investments in associates - went up
by 9.6 per cent to $554.8 million. Our total profit after tax declined 19.5 per cent to
$523.5 million, as the prior year’s result was bolstered by profit on the sale of our 24.6
per cent shareholding in North Queensland Airports.
For several years, we have also reported underlying profit after tax to help investors
more easily compare profits between years when revaluation changes or one-off
transactions can occur. You can find a reconciliation between reported and underlying
profits on page 33 of our financial statements.
In the 2019 financial year underlying profit after tax was up more than four per cent to
$274.7 million.
Underlying earnings per share rose 3.6 per cent to 22.8 cents – and the Board has
confirmed a final dividend of 11.25 cents per share, up 2.3 per cent on the prior year.
We are pleased with this financial performance in a year in which aviation growth
moderated, as inevitably happens after a period of major expansion.

Planning for the future
Travellers using Auckland Airport generally have three priorities. They want to get to
and from the airport on time. They want a stress-free experience before boarding or
after arrival. And they expect their flight to take off or land on schedule.
We alone can’t control all of these needs – but we can contribute to a better, faster,
easier travelling experience for every traveller who passes through our doors. We are
doing this by delivering a multi-billion-dollar investment programme in one of New
Zealand’s busiest development precincts, and by working very closely with all of our
partners – everyone from ground handlers to border agencies to air lines.
We have more than 200 inter-connected infrastructure projects either planned or
underway at the airport, spanning the airfield terminal and transport developments.
The Board provides critical oversight to support management to deliver these projects
on time, within budget and to the satisfaction of all our customers, travellers and visitors
to the airport - in a New Zealand market that is a very challenging one to procure
construction and infrastructure.
Building for the future
We expect the number of travellers passing through Auckland Airport to double by
2044, and Auckland Airport has long-anticipated the need for a second runway to
accommodate this growth.
We have been through the formal process required to gain planning approval for our
new Northern Runway, and I want to update you on progress.
In December 2018 Auckland Council released its recommendations on the notices of
requirement to enable construction and operation of the new runway. We largely
accepted these recommendations.
However, a number of appeals were lodged with the Environment Court. We anticipate
that the last of these appeals will be resolved shortly. In consultation with airlines, we
have advanced detailed planning and design to understand more fully the runway
project scope, programme, timing and cost. We do not yet have an update on when the
second runway will be needed, but we want to be firmly in a position to deliver it when
it’s required and on time.

Delivering for NZ
We cannot consider Auckland Airport’s future in isolation from the trends and market
developments influencing our tourism sector. Tourism is one of New Zealand’s most
important industries. It employs eight per cent of the New Zealand workforce, and
contributes $15.9 billion to GDP.
This year, the Government released its strategy to ensure New Zealand benefits from
sustainable tourism growth which is spread across the country, rather than being
concentrated on a few of our more beautiful spots.
Growth for the sake of growth will not serve our nation well. Auckland Airport believes
the tourism industry needs to better understand and manage its impact, to ensure it
does continue to grow successfully and sustainably.
We are playing our part to support tourism’s sustainable growth, by partnering with the
tourism industry and airlines to attract high-value visitors from a diverse range of
markets and by encouraging people to travel around New Zealand.
Over the past four years we have worked with airlines and tourism partners to unlock
new routes and boost capacity, increasing from 19 airlines in 2015 to 29 international
airlines today.
Outlook
Turning to the year ahead, the current financial year is the first in which our discounted
aeronautical prices apply.
Following a review of the aeronautical prices we set in 2017, the Commerce
Commission formed its view that our target return was not fully justified. Auckland
Airport carefully considered the Commission’s feedback earlier this year. We believe
the earlier prices we set for airlines were fair, competitive and in line with international
standards.
But we acknowledged the Commission had a different view and decided to reduce
charges to airlines by $33 million over the final three years of the current five-year
pricing period – taking us out to the 2022 financial year. This amounts to an average
annual reduction of $11 million in present value terms. To provide some context, this
represents approximately a 1.8% reduction when compared to total revenue for 2019.

We expect underlying profit after tax (excluding any fair value changes and other one-
off items) in the current, 2020 financial year to again be between $265 million and $275
million.
As a number of our key infrastructure projects enter the building phase, we expect total
capital expenditure of between $450 million and $550 million.
As always, our guidance is subject to any material adverse events, significant one-off
expenses, non-cash fair value changes to property and deterioration as a result of
global market conditions, or other unforeseeable circumstances.
Governance
Before I conclude, on behalf of the Board I would like to thank Brett Godfrey for his
eight years of service as a director. As I mentioned earlier, Brett will formally retire from
the Board at the end of this meeting. His experience combined with a 20-year career in
airlines, and his international connections to the industry, have been invaluable. We
will miss Brett's contribution.
Later in the meeting, you will have the opportunity to consider a resolution to elect
Elizabeth Savage as an independent director, replacing Brett. You will also be asked
to consider the re-election of Christine Spring as an independent director.
The Board unanimously recommends voting in favour of their election.
Conclusion
We will continue working hard in the year ahead to build an airport of the future that
adds value to you as investors, to our travellers, to the community, and to New
Zealand.
I want to offer my sincere thanks to my fellow directors.
I would also like to thank management, the airport team and our service partners. This
is a business that never sleeps. Your tireless effort and commitment have delivered
results in which you can all take pride.
I have found it satisfying to see what has been achieved in the last financial year – and
look ahead with confidence to delivering on our infrastructure development programme.

Finally, on behalf of the Board and everyone at Auckland Airport, I would like to thank
our community and customers for their support, patience and the wisdom of their
insights and feedback as we continue to transform Auckland Airport for the future.
Thank you.

Adrian Littlewood, Chief Executive
Overview
Morena - good morning and welcome everyone to Auckland Airport’s annual meeting.
Patrick has mentioned some of the year’s highlights – and today I’d like to share some
more detail on how we are transforming Auckland Airport. During the 2019 financial
year, we took some decent strides towards building the airport of the future that
Auckland and New Zealand will need to remain globally connected and competitive.
We are well advanced in the planning, delivery and building of our eight key anchor
projects that form the core of our once-in-a-generation upgrade of the airport.
At the same time, we need to continue to drive sustainable shareholder returns for
investors by pursuing new commercial opportunities and ensuring we remain a
company with a strong focus on growth.
I will start by updating you on some factors influencing traveller numbers, and the
positive impact of the construction and transport projects we delivered during the 2019
financial year. Then I will talk about the next phase of investment and expansion and
refining how we design and implement our projects.
I will finally wrap up with an update on our growing contribution to our community.
Short and long-term trends
The long-term trend is for travellers using Auckland Airport to double by 2044 – but
changing market dynamics means we will see fluctuations in growth rates between
years.
2019 was another record year for traveller numbers, but our numbers grew at a slower
pace compared to recent years, and there were several reasons for this.

In a year of constant headlines about trade wars, Brexit, and civic activism, we saw
different growth patterns emerge. Globally, passenger demand for travel has slowed,
including in some of our key visitor source markets - Australia, China and Japan.
New routes to Asia and North America have been added – but the recent trend of rapid
capacity growth is slowing due to airlines adjusting their business strategies to focus on
yield over capacity.
This month was another example with Jetstar announcing it was pulling out of five New
Zealand regional routes, reducing some important connections into the regions.
Looking ahead, however, future growth projections remain strong.
Urbanisation and the growth of the middle class in India, China and South East Asia will
continue to represent a significant opportunity for our tourism sector over the long term.
Diversity of visitor markets remains an important part of our ongoing strategy, to ensure
we are focusing on new growth opportunities when other markets mature.
For example, we have recently established a team in India to work with airlines and
travel trade to build that emerging inbound market, and we recently led a tourism
delegation to India to meet with government, travel agencies and airlines. This
approach builds on what we have learned from our China market development work.
Delivering
As Patrick mentioned, we have transformed and expanded the departures area in the
International Terminal. This challenging project has generated a really positive
response from our customers. We achieved an Airport Service Quality score of 4.15 out
of 5 for both terminals - effectively achieving an 83 per cent customer satisfaction rating
- and a 12-year high for Auckland Airport.
This new International Terminal departure area provides quality facilities to support
travellers at the start of their journey with upgraded bathrooms, generous public seating
areas, more device charging stations, and improved internet connectivity for every
traveller.
The food choices are excellent. Fourteen new food and beverage outlets were added in
the financial year 2019, with some of New Zealand’s award-winning chefs behind them.

The quality of what’s been achieved has already been recognised with a major global
award – the 2019 ‘Airport Food & Beverage Offer of the Year’.
We are also working hard to provide consumer choice and great deals for our
customers online with our innovative shopping platform The Mall – enabling
international travellers to shop at multiple retailers via a single online check out.
Auckland Airport is the guardian of one of New Zealand’s most important transport
hubs, and we’re delivering for the future by tackling some significant infrastructure
projects.
In June this year we started construction work on two of our eight key anchor projects.
We began our largest airfield expansion since the 1970s, to accommodate the growing
number of aircraft expected in coming decades. This project will increase the airfield by
250,000m
2
or the equivalent of 30 rugby fields and will deliver new taxiways and six
new remote stands to park and service aircraft.
We also awarded the contract for our largest roading project in decades – the Northern
Network. This will transform the main entrance way into the airport, improve traffic
flows, enable more public transport, and upgrade and strengthen public utilities. But
importantly, this project will act as a foundation for future growth, creating a resilient,
future-proofed transport network able to support the wider terminal and runway
developments.
East of the airport, we are also about to commence a new transport project in
partnership with the New Zealand Transport Authority and Auckland Transport as part
of the Southwest gateway programme. Once complete, the programme will deliver
improved rail and bus connections at Puhinui Station, along with a rapid transit link to
Auckland Airport.
We made excellent progress in other areas of our development business.
Construction has kicked off on the new luxury Te Arikinui Pullman Auckland Airport
Hotel – our joint venture with Tainui Group Holdings.
This is just one of the many successful projects being managed by our property
investment business, which again had another outstanding year of growth in 2019.
Auckland Airport now owns and manages one of the country’s largest investment-grade

property portfolios, with an annual rent roll of $100 million and a portfolio value now
exceeding $1.7 billion. We remain committed to supporting the ongoing growth of our
investment property business.
This year we will continue to upgrade the existing Domestic Terminal, while advancing
our plans for a new Domestic Jet Facility to be integrated with the International
Terminal. We’ll also continue with our other anchor projects and we expect to soon
begin construction works on a major upgrade and expansion of a new International
arrivals and biosecurity screening area.
Planning for the future
During the year we took a fresh look at the key projects within our infrastructure plan
working closely with our airline partners. Our infrastructure projects will add significant
aeronautical capacity to cater for future growth – and we need to get them right.
This review work continues across our portfolio and we are continuing to retest our
assumptions and demand triggers with airline partners. We previously planned to
update investors next month on our refreshed infrastructure plan at an investor day,
however in light of continuing reviews with airline partners and recent changes in
aviation demand and market structure, for example Jetstar’s decision this month to
withdraw regional NZ services, we have decided to defer investor day until we have
completed that work. We will confirm a new date in due course.
Our ongoing focus on design and planning has meant that spend on physical works
has been later than expected and therefore our capital expenditure during the 2019
financial year was at the lower end of our forecast, coming in at $284.1 million against
guidance of $280 - $330 million.
We still expect to finish the five-year pricing period through to 2022 strongly, with total
commissioned assets over the period broadly in line with the forecast released to the
market in mid-2017.
As an indication of the current momentum in our build programme, we now have both
infrastructure and commercial projects with a combined value of over $1.1 billion
underway.

Our people, our community, our environment
The extensive growth and change underway at Auckland Airport have far-reaching
impacts and, more than ever, we need to look after our people, our community and our
environment.
We are focused on taking care of our travellers with a new approach to customer
service and training, aimed at ensuring everyone has a relaxing and enjoyable
experience at Auckland Airport.
We have also launched a multi-channel communications campaign called ‘Stay In The
Know’ to keep local businesses, precinct workers and the public up to date with what’s
happening at the airport and how it might impact their journey.
In terms of the transformation ahead, we know we can only successfully deliver change
of this order if our people and contracting partners are engaged and on board.
Our workforce has increased by more than 40 per cent over the last three years as the
infrastructure programme has grown and our people are working in an environment of
continual change. This presents opportunities, but also requires a special effort to
preserve the things that make the airport a place where people enjoy working and are
safe.
In the past year our recordable injury rate dropped 2.2 per cent. In the same period, we
saw a 6.8 per cent increase in the number of safety observations and hazards reported.
That’s a good sign our employees and contractors are proactive and engaged.
In 2015, we set up Ara – our airport jobs and skills hub. It’s our joint initiative with the
South Auckland community, government agencies, training providers and employers, to
improve outcomes for job seekers.
In the last financial year Ara facilitated 210 job placements, with 175 of these involving
people from South Auckland. A further 785 people have completed training offered
through Ara, and there are nearly 700 others still in training. We were pleased to see
Ara’s work recognised by the Government earlier this year, as it launched two new jobs
and skills hubs which were modelled on Ara.

At a broader level, Auckland Airport again granted more than $345,000 to community
projects in the 2019 financial year through the Auckland Airport Community Trust to
support learning, literacy and life skills in South Auckland.
Our airport cannot grow and develop without acting to protect our natural environment.
We measure our progress against targets for energy, carbon, water and minimising
waste across our operations and in the 2019 financial year we reduced energy use per
passenger at the airport by 18 percent. Waste to landfill per passenger has nearly
halved, and carbon emissions are down 33 per cent against 2012 benchmarks.
We are delighted to be a finalist in Enviro-Mark Solution’s 2019 Excellence in Climate
Action Awards for our energy efficiency and low-carbon initiatives, and I’m sure this
also contributed to Auckland Airport being recognised as one of New Zealand’s top ten
most trusted companies by Colmar Brunton for the third year in a row.
Conclusion
Our five-year business strategy is very clear about what we need to do to deliver on our
ambitions. We are a growth company, investing for the future. We are working hard to
support and enable New Zealand to be a successful exporting nation and a great
tourism destination.
In the past year, we worked hard to execute on our strategy and in doing so, we have
strived to make life better for travellers, our customers, our local community, New
Zealand and our investors, but we know we have a lot more to do.
I want to thank our people at Auckland Airport and our partners for helping to make it all
happen. Our achievements are only possible thanks to the dedication of our staff and
the thousands of others that work on our projects.
I also want to thank our valued customers and our Board for its guidance.
Finally, thank you to our investors for your ongoing support as we focus on the future
and our continued growth and transformation.
Nga mihi. Thank you.
ENDS