AIA update on 2020 results and organisational change

Market Release | 1 July 2020

Auckland Airport provides details of
Other Significant Items expected to
impact 2020 financial results and an
update on further organisational change

Auckland Airport today provides a further update on its response to the outbreak of
COVID-19 and outlines Other Significant Items that are expected to impact earnings
for the financial year to 30 June 2020 and further proposed changes to the size of the
organisation’s workforce.
On 16 March 2020, Auckland Airport suspended underlying earnings guidance for the
current financial year due to the significant uncertainty surrounding the duration and
impact of COVID-19 travel restrictions on the business.
Auckland Airport responded quickly to the disruption of tourism and aviation markets
through a comprehensive plan to bolster liquidity, reduce operating costs and suspend
or terminate capital expenditure, including:
• deep cuts to discretionary expenditure;
• reviewed and suspended external consulting work;
• reduced the number of external contractors supporting the capital programme
and wider business;
• staff changes across the business, including in the company’s infrastructure
development programme;
• reduced remuneration of directors and executives to 80%;
• lowered most other employees’ hours/salaries to 80%;

• suspended bonuses and short-term incentives for FY20 and implemented a
hiring and salary freeze;
• rationalised operations to reflect the new operating environment;
• suspended selected capital expenditure projects with a forecast completed
value of more than $2 billion;
• extended bank debt maturities until calendar 2022 and 2023;
• obtained financial covenant waivers until 31 December 2021 (inclusive) for
bank and United States Private Placement borrowings; and
• raised $1.2 billion of equity.
The net adverse impact of Other Significant Items on Auckland Airport’s reported profit
for FY20 is expected to be between $50 million to $90 million. These Other Significant
Items include:
Range

Gains

Investment property revaluations 150.0 130.0 Gain Non-cash
Wage subsidy 4.3 4.3 Gain Cash

Capital Expenditure
Capex WIP write-offs and impairments 42.0 52.0 Loss Non-cash
Capex project termination/make good costs 68.0 70.0 Loss Cash

Employee costs

Redundancies 4.0 5.0 Loss Cash

Accounts receivable impairments

Bad and Doubtful Debts 10.0 11.0
Loss
Cash
Rent abatements - retail 62.6 67.6
Loss
Cash
Impaired lease receivables - retail 16.4 16.4 Loss Non-cash
Rent abatements - property and aero 3.5 4.5 Loss Cash

The above estimates are subject to finalisation, external audit and Board approval of
the FY20 financial statements.
Chief Executive Adrian Littlewood said protecting the health and safety of everyone
working and travelling through Auckland Airport remained the organisation’s key
priority, as it continued to respond to the most disruptive crisis in the history of aviation.

“These are extraordinarily challenging times for all of us in the New Zealand tourism
industry, with international passenger numbers now averaging 800 per day at
Auckland Airport, less than 5% of what they were six months ago.
“Airlines have been deeply impacted and the number of carriers operating here has
fallen from 29 to 11. Daily flight numbers have also reduced, falling by 80% to 100 per
day made up of domestic, cargo and repatriation services.
“We are a resilient business, but this is a global shock to aviation the likes of which
we’ve never seen, and our organisation continues to be materially impacted.”
Mr Littlewood said Auckland Airport had made the difficult decision to propose further
changes to staffing levels, in line with fewer flights and people travelling, as well as the
deferral of capital projects.
“These were ambitious projects we were proud to be leading and delivering for New
Zealand, and it’s been very painful for the team to see progress stall so suddenly, and
the wider impact this is having. It goes without saying that this is a very difficult time
for our organisation,” said Mr Littlewood.
In recent months, Auckland Airport has reduced its workforce by 25%, including
releasing 90 contractors who were largely connected to the capital programme. Mr
Littlewood said the organisation is now proposing to further reduce staffing levels,
mainly impacting the company’s infrastructure team and its operations team, while
protecting the ongoing safety and security of the airfield.
Auckland Airport’s full year results for the 12 months to 30 June 2020 will be released
to the market on the morning of 20 August 2020.
ENDS

For further information please contact:
Investors:
Head of Strategy, Planning and Performance
Stewart Reynolds
+64 27 511 9632
stewart.reynolds@aucklandairport.co.nz

Media:
Head of Communications and External Relations
Libby Middlebrook
+64 21 989 908
libby.middlebrook@aucklandairport.co.nz