AIA – 2020 Annual Meeting Chair & Chief Executive Addresses

Market Release | 22 October 2020

2020 Annual Meeting: Chair and Chief
Executive’s addresses
Patrick Strange, Chair
Overview
Tēnā koutou, tēnā koutou, tēnā tatou katoa.
Good morning and welcome everyone to Auckland Airport’s annual meeting. Thank you
for making the effort to join us today via video link, and I’m sorry we can’t meet with you
in person. With the uncertainty around COVID alert levels we decided holding a virtual
annual meeting was the most practical way of ensuring everyone who wanted to could
attend the meeting safely.
I’m Patrick Strange and I’m Auckland Airport’s Chair. Here with me today is Chief
Executive Adrian Littlewood who will speak shortly and Director Julia Hoare, who will
address you briefly on her re-election.
My fellow directors are also joining via video link: Mark Binns, Dean Hamilton, Liz
Savage, Justine Smyth, Tania Simpson and Christine Spring. Our Chief Financial
Officer Phil Neutze is also with us by video. And finally, we also have our General
Counsel Mary-Liz Tuck here with us today, other executives, and our auditors Deloitte.
We began the 2020 financial year in a strong position, achieving solid passenger
volumes in the first two financial quarters. Our major infrastructure redevelopment

programme was underway and on track with four key projects entering the execution
phase.
Then the pandemic arrived. The emergence of COVID-19 is the biggest challenge
we’ve faced in our 54-year history, significantly impacting our organisation, the aviation
and tourism sectors and the wider economy.
At the outset of the pandemic, we knew it was important to respond swiftly, not only to
safeguard our organisation’s future but also to protect the safety and wellbeing of our
people, travellers and the thousands who work in the airport environment.
Knowing our business is resilient and its long-term fundamentals remain strong, we set
about immediately to chart a response that would enable Auckland Airport to recover
and emerge from the crisis in a strong position.
We moved quickly to reduce both operating and capital costs and to preserve cash.
This included reducing the size of our workforce; lowering the hours and salaries of
most non-frontline staff to 80% for five months; reducing directors’ remuneration by
20%; and suspending or cancelling all but critical capital projects.
We carried out a successful equity raise of $1.2 billion in April, together with a major
restructure of our near-term bank debt to protect our balance sheet. We also secured
two-year covenant waivers with our banks and USPP lenders.
We’re very grateful to you, our shareholders, for your show of confidence and support.
You understand, as we do, that Auckland Airport has a key role to play in New
Zealand's economic recovery. We are a trading nation, vitally dependent on access to
world markets, and once conditions allow for tourism to recover, our country remains an
extremely attractive place for high value tourists to visit.
However, before we update you on our investment and development plans, a summary
of the key aspects of our performance for the 2020 financial year.
Results
It will come as no surprise to anyone that our results were in line with the severe
downturn in global aviation.

Virtually overnight, we went from 30,000 travellers per day at our international terminal
to a few hundred – some days, none.
In the year to 30 June 2020, revenue was down 24% to $567 million, with earnings
before interest expense, taxation, depreciation, fair-value adjustments and investments
in associates decreasing 53% to $260.4 million.
Reported profit after tax was down 63% to $193.9 million and underlying net profit was
down 31% to $188.5 million. Underlying earnings per share was down nearly 35% to
14.7 cents for the 2020 financial year.
The total number of travellers passing through Auckland Airport declined to 15.5 million,
down 26.5% on the previous year, the first decline in passenger numbers since the
Global Financial Crisis in 2009.
In contrast, property has performed strongly even since the outbreak of COVID-19. As
a result, annual rent roll increased 4% to $104 million and the portfolio value has risen
17% to $2 billion.
To manage cashflow, we are not in a position to pay dividends to shareholders for the
2020 financial year, the first time Auckland Airport has not paid a dividend since listing
on the NZX 22 years ago.
Looking ahead to the 2021 financial year, aviation continues to face challenging times,
which naturally brings uncertainty to the timing of our recovery.
Our financial performance is strongly linked to international arrivals and departures, and
while there is no doubt that international travel will recover, it’s not clear how quickly.
It’s that high degree of uncertainty that prompted us to suspend underlying earnings
guidance for the 2021 financial year. We will reassess this decision at our interim
results in February.
While both IATA (International Air Travel Association) and Standard & Poor’s have
forecast a full recovery of international travel in approximately three years, at this stage
we continue to think it prudent to take a more conservative approach.

We believe a full recovery could well take longer than three years. But we’re hopeful
that domestic travel will return to normal within two years. And we believe that we will
see quarantine-free travel both ways across the Tasman and to the Pacific Islands
earlier.
We believe one of the keys to this is development of a greatly enhanced risk and
technology-based border system, and we are doing our part in supporting this.
Infrastructure Investment
In terms of construction work on site, the start of the 2020 financial year could not have
been more different to how we ended it.
We began with more than 200 inter-connected infrastructure projects either planned or
underway to build an airport for the future. These included major transport
developments, terminal upgrades and airfield works – projects we were proud to be
delivering for New Zealand.
But in March construction came to a standstill as New Zealand entered level 4
lockdown, and we made the difficult decision to cancel or defer more than $2 billion of
infrastructure projects. Only projects essential for safety or resilience were untouched.
Since then, we’ve been conducting an in-depth review of our development priorities.
We remain confident in and committed to our long-term infrastructure plan but the
timing of parts of it are clearly uncertain.
ln the near term, we will be prioritising projects focused on safety, asset replacement,
maintenance and resiliency. We are also very conscious that domestic volumes will
return more quickly, and may challenge the capacity of our domestic terminal. We’ll
continue to assess our planned projects against future market conditions and our ability
to support the investment required to complete them. Adrian will talk more about this
shortly.
In the 2021 financial year, capital investment will be focused on existing roading
projects; delivering core airfield renewals such as slab replacement on the runway and
apron works along with upgrades to the baggage system.

As I mentioned earlier, our property business remains strong. We continue to be
approached with inquiries for new property developments – solid growth here can play
a key role in our organisation’s wider recovery.
Capital expenditure for the 2021 financial year is still expected to be between $250
million and $300 million.
In terms of governance, our board continues to evolve and refresh. At our 2019 annual
meeting, we were joined by Liz Savage, who has 20 years’ experience in senior airline
leadership roles in Australia and Europe. Liz has already proven herself a valuable
addition.
We are pleased to have Julia Hoare standing for re-election as an independent director
after three years with the board, in line with NZX listing rules. Julia is Chair of our audit
committee and a very valuable contributor. The board unanimously supports her re-
election.
Finally, I want to offer my thanks to my fellow directors for their hard work over the year.
But I particularly want to highlight and acknowledge the unfailing commitment of the
Auckland Airport team – everyone from front-line staff to those in the executive team.
It’s been a tough year. We’ve seen projects put on hold and significant job losses,
impacting us, but also our commercial partners and contractors who support the airport.
Meanwhile, the team has continued to support international repatriation and freight
operations 24 hours a day under difficult conditions, which they have done superbly.
So again, on behalf of the board and our shareholders, thank you to all those people.
While the path ahead is still uncertain, we remain confident about our future and are
well placed for recovery. Ultimately, we know we will return to adding value for
investors, and growing New Zealand’s success in travel, trade and tourism.
Finally, thank you once again to our investors for showing such strong support through
these uncertain times. It is very much appreciated.
I’ll now hand over to Adrian.
Adrian Littlewood, Chief Executive

Thank you Patrick.
Morena - good morning and welcome everyone to Auckland Airport’s annual meeting.
As Patrick has noted, Auckland Airport has never faced a year like this one.
Patrick spoke about some of the broader issues and how we handled those challenges
– and today I’d like to share some more detail on what the team at Auckland Airport did
to respond to the arrival of this pandemic and how we’re charting our course of
recovery.
Firstly, I want to say how proud I am of our team here at Auckland Airport.
Through demanding and uncertain times, particularly during the early days of the crisis,
our people were on hand to ensure travellers could get to where they needed to be.
Airlinks remained open for crucial exports and the airfield continued to run in a safe and
reliable manner.
Everywhere I go within our business I’m proud to be surrounded by the committed
people who have ensured that Auckland Airport gets its vital job done. It’s thanks to
these people that the day-to-day operation runs smoothly and the company is in the
best position to make a strong long-term recovery.
I also need to acknowledge the 260 people who have left our organisation,
representing about 37% of our workforce.
As international passenger numbers fell, and our infrastructure development
programme was scaled back, we had to make the difficult decision to reduce the size of
our organisation. The staff who left were valued members of our team and we were
really sorry to see them go.
When the pandemic first hit, we put into action a new three-tier plan: Respond,
Recover, Accelerate.
In the first phase, Auckland Airport took immediate steps to take care of the health and
safety of travellers, our people and the community. Throughout the pandemic, we have
worked side-by-side with public health officials to make sure border protocols were

being followed to help protect our country from the spread of the virus, and we have
stepped up sanitisation measures across our terminals.
During those hectic first months, our people played a vital role in facilitating repatriation
services – often helping airlines that had no recent history in New Zealand to get tens
of thousands of people home.
We also had to be mindful of the company’s financial health, and we moved quickly to
address financial challenges.
We took steps to strengthen our balance sheet, securing significant support from our
lenders including extending the maturity dates of our bank loans and agreeing
covenant waivers with our banks and USPP investors. We went to shareholders in April
for an equity raise of $1.2 billion, and I join Patrick in thanking you all for your support in
this.
We also implemented a range of measures to manage cash flow including the tough
call to cancel or defer the majority of our infrastructure development programme.
However, the drop in air travel did create some opportunities for us. It meant we were
able to bring forward planned works to replace pavement at the eastern end of the
runway, completing this important airfield maintenance work with minimal disruption to
airlines and the travelling public.
We’re also pushing on to deliver key transport infrastructure.
Anyone who’s driven into the airport from the north along George Bolt Memorial Drive
will have seen the team hard at work. This road is a vital connection linking the airport
to the city and by completing these works now, with less traffic on the roads, we’ll be
better positioned for growth as the recovery continues. Equally our joint project with
NZTA Waka Kotahi on adding mass-transit lanes to State Highway 20B means that
both the southern and northern entrances to the airport precinct will shortly benefit from
significant upgrades.
We are now into the early stages of our recovery - working hard to build and maintain
public confidence in air travel, rebuilding our domestic business, and playing our part in
efforts to re-establish regular, reliable airlinks with Australia and the Pacific Islands.

It’s been great to see domestic travel returning strongly with Auckland’s recent shift
back to level 1, with passenger numbers in the October school holidays reaching about
65% of the same period last year. The encouraging increase in domestic travel has
allowed us to reopen all of our domestic parking products, including valet, with strong
customer demand. As a result, Auckland Airport’s financial performance in the first
quarter of the 2021 financial year has been stronger than we anticipated when we
undertook the equity raise. While the shape of recovery has and will continue to be
uncertain, operating earnings (EBITDAFI) averaged across July to September have
been approximately $10 million per month, versus the small monthly losses we allowed
for when sizing the equity raise.
Since the earliest days of the pandemic, Auckland Airport has played a leading role in
developing comprehensive plans to support government decision-making about when
and how to reopen the border to other low-risk countries. Earlier this year we helped
bring together and support a team of 40 experts in the development of a blueprint for a
Trans-Tasman safe zone and this was shared with Australian and New Zealand Prime
Ministers.
The reopening of the Australian states of New South Wales, South Australia and
Northern Territory to quarantine-free travel for New Zealanders is a step in the right
direction and we continue to see new examples around the world of countries
establishing new processes and protections to allow borders to safely re-open.
We believe the Government and the private sector need to work together with urgency
in order to chart a path for New Zealand in a post-pandemic world - in a way that keeps
our communities safe, but also allows families to reconnect and jobs, tourism and our
economy to recover.
We think New Zealand needs to develop a truly capable domestic health security
system that will allow us to live with the ongoing risk of COVID-19, while ensuring our
country can stay safe, and stay connected to the world.
We will continue to work alongside and support the New Zealand Government as it
considers future arrangements for quarantine free-travel across the Tasman and to
other low risk countries as conditions permit.

To enable safe travel zones, Auckland Airport has developed a comprehensive plan to
ensure we can provide a safe, separated pathway through the international terminal
whenever the Government decides it is safe to allow quarantine-free arrivals. We’ve
worked hard with our border agency and airline partners and the physical works are
now complete to allow for the separation of different categories of travellers under a
range of different scenarios.
As we look to the future, Auckland Airport will continue to build on earlier work to
maintain and bolster airlinks and drive inbound tourism.
Prior to the arrival of COVID-19, Auckland Airport was connected to 43 international
destinations and 29 different airlines. Our team worked hard to develop those links over
many years and we’re confident that as economies and airlines return to strength,
those vital airlinks will be restored. New Zealand continues to be an attractive
destination and this may be more so in a post-pandemic world.
As mentioned previously, the outbreak of COVID-19 and the reduction in flight and
passenger numbers meant we had to re-evaluate our entire infrastructure programme.
Our aim was to act swiftly and prudently to avoid unnecessary spending while
preserving what we had already achieved.
Major developments, including four key anchor infrastructure projects, were well
underway:
• A 250,000m
2
expansion of airfield taxiways and remote stands
• Preparation work for two key terminal expansion projects – the $1 billion-plus
Domestic Jet Hub and a new $350 million-plus international arrivals area
• A circa $100 million upgrade to our core roading network and construction of an
additional Park & Ride facility
• We had also secured Environment Court approval for design changes to the
second runway, including extending the planned length
Until we have more certainty about the outlook for aviation, the decision was made to
defer many of these projects. These include terminal projects such as the expanded
international arrivals area; airfield projects including the extension of taxiways Mike and
Lima; and transport projects such as the new Park & Ride South facility.

We know our people and partners were excited to be part of these key projects, so
deferral decisions were not taken lightly. However, we will preserve and build on our
earlier project work and we will review the timing of project re-starts as demand triggers
are met.
We are also mindful that while we must carefully monitor our balance sheet, we also
have a window of opportunity for development while the airport is quieter. We are
actively considering opportunities in this regard including the shape of our future
investment in new domestic capacity.
Community
COVID-19 has changed many aspects of our business, but our commitment to be a
good neighbour and good employer remains the same.
Because COVID-19 has placed such unprecedented challenges upon our people,
we’ve made sure lines of communication with staff have been solid throughout the
pandemic, keeping our people connected with the organisation and with each other.
We’ve worked with contractors to push for better health and safety outcomes – our
commitment to zero harm means we continually seek improvement in our processes
and performance.
The result of this work was clear – with an 89% increase in the number of safety
observations and hazards reported through our Safety Management System, a 72%
decline in employee injury and a 6% decrease in passenger incident rates in 2020
financial year.
Through the Auckland Airport Community Trust, we shared over $350,000 among
community projects supporting learning, literacy and life skills in South Auckland
During the year our Auckland Airport Jobs and Skills hub Ara continued to connect local
people with training and employment opportunities, as part of joint initiatives with
government agencies, training providers and employers.
Despite the challenges our organisation is currently facing, Auckland Airport’s long-term
commitment to Ara remains. However, we have changed the model to partner more

closely with the Ministry of Social Development and the Auckland Business Chamber.
We continue to support Ara with development opportunities and by providing building
facilities for its headquarters.
In the 2020 financial year we also made good progress on achieving our sustainability
targets but the outbreak of COVID-19 has prompted a review of our approach to
sustainability. We are looking forward to providing an update on our new strategy and
targets when we release our interim results for the 2021 financial year.
Conclusion
Back in 2014, Auckland Airport created a new master plan. It was a vision for the future
with an ambitious programme of infrastructure development at the centre of it.
Following our formal infrastructure consultation and aeronautical price setting process
in 2017, we confirmed the development path and much of this programme was coming
to life. When COVID-19 hit we were on the approach to a new domestic jet hub, a
second runway and a range of transport projects.
COVID-19 might have changed the outlook and it has certainly reset the timelines for
tourism growth – but our commitment to our masterplan and vision for the future
remains. Auckland Airport will continue be the airport to serve New Zealand’s future
needs.
I want to thank our people at Auckland Airport, and our partners in the aviation sector,
for doing such a remarkable job in such uniquely testing circumstances.
I also want to thank our valued customers and our Board for its guidance.
Finally, thank you to our investors for your ongoing support.
Nga mihi. Thank you.
ENDS
For further information please contact:

Investors:

Stewart Reynolds
Head of Strategy, Planning and Performance
+64 27 511 9632
stewart.reynolds@aucklandairport.co.nz


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