Auckland International Airport Limited · NZX:AIA
Auckland International Airport — Investor Day (March 2009)
52 slides from Auckland International Airport's investor day presentation, Mar 30, 2009
Slide 1: Agenda
AGENDA For personal use only Investor Day - 30 March 2009 10.00 Introduction Simon Moutter Business Development Presentation Simon Moutter Aeronautical Division Presentation Tony Gollin Retail Division Presentation Adrian Littlewood Property Division Presentation Peter Alexander Corporate Presentati
Slide 2: Flightpath for Growth: Auckland Airport Growth Strategy Overview
For personal use only Flightpath for Growth Auckland Airport Growth Strategy Overview 30 March 2009
Slide 3: This journey is about clarity and focus
THIS JOURNEY IS ABOUT CLARITY AND FOCUS For personal use only • Transition of management personnel and operating environment • New Leadership Team appointed • Divisional structure clarified with greater accountability for matched revenue, expenditure and capital investment • Focus shifted from build
Slide 4: Our operating environment has got tougher
OUR OPERATING ENVIRONMENT HAS GOT TOUGHER For personal use only • Global economic conditions reducing demand for air travel • Airlines under severe financial pressure • Relentless growth in pax volume cannot ? be relied upon near term • Customer discretionary spending power is reducing • Time to mar
Slide 5: We know we need to lift our game
WE KNOW WE NEED TO LIFT OUR GAME For personal use only • Profitability has been fairly flat due to the cost drag of high capital spending in the Aero Division • Passenger volume growth has lagged global trends • Retail offering is off the pace internationally • Property development activity has been
Slide 6: We've built strategies to grow, not retrench
WE’VE BUILT STRATEGIES TO GROW, NOT RETRENCH For personal use only • New Zealand needs us to stay growth focused • Pax volumes will return to growth trend, it’s just a matter of when • Route development sales cycles are long – need to stay focused and engaged • Still plenty of opportunity to grow re
Slide 7: A two phase approach
A TWO PHASE APPROACH For personal use only Phase 1 • Get fighting fit to ride out the downturn by making every dollar count and being ready to take opportunities which arise • Reduce capacity related capex in Aero Division to bare minimum • Invest carefully in Retail and Property Division growth opp
Slide 8: Looking at the business in three layers
LOOKING AT THE BUSINESS IN THREE LAYERS For personal use only STEP-OUTS ng value beyond the airport ADJACENCIES CORE Adding value to and enabling efficient movement of people and goods between land and air side at Auckland Airport Business activities within or close to airport grounds and/or closely
Slide 9: Growth strategy – summary
GROWTH STRATEGY – SUMMARY For personal use only 1. Create a healthier STAKEHOLDERS commercial environment “FIGHTING 2. Increase the focus on and FIT” discipline of cost efficiency and capital productivity CORE BUSINESS 3. Unlock the full growth potential from the core business 4. Capture growth oppo
Slide 10: Strategic themes
STRATEGIC THEMES Themes What it is For personal use only Create a healthier commercial • Develop a more customer-centric approach that improves alignment of business environment operations with airlines 1 • Facilitate a balanced and sustainable stable of airlines • Ensure stakeholders and regulators
Slide 11: Aeronautical Business Development Presentation
For personal use only Aeronautical Business Development Presentation
Slide 12: Auckland Airport needs to capture its share of global passenger growth
AUCKLAND AIRPORT NEEDS TO CAPTURE ITS SHARE OF GLOBAL PASSENGER GROWTH For personal use only • Asia-Pacific is forecast to grow the fastest over the next 19 years • We need to be proactive in capturing a share of that growth and leveraging changing geographical dynamics in airline industry • New air
Slide 13: Auckland Airport needs to increase its LCC market share
AUCKLAND AIRPORT NEEDS TO INCREASE ITS LCC MARKET SHARE For personal use only Low Cost Carriers - Market Share Estimates Traditional carriers • Auckland Low cost carriers 100 currently has a small proportion of the low cost 80 carrier (LCC) market 60 • LCCs stimulate traffic and grow 40 passenger vo
Slide 14: Australian tourism forecast is stronger than New Zealand's
AUSTRALIAN TOURISM FORECAST IS STRONGER THAN NEW ZEALAND'S For personal use only NZ v Aus Tourism Forecast •We need to compete more with Australia (esp. Aus 07 NZ 07 Aus 14 NZ 14 BNE, MEL, PER) which are targeting 1248 New Zealand's major Asian markets 1217 growth market 1138 will be Australia •If w
Slide 15: Flat growth in holiday arrivals to NZ last four years
FLAT GROWTH IN HOLIDAY ARRIVALS TO NZ LAST FOUR YEARS For personal use only 14
Slide 16: Australia international holiday opportunity
AUSTRALIA INTERNATIONAL HOLIDAY OPPORTUNITY For personal use only Aus Holiday Tourists (Arrivals only) Across all Routes 60% 50% % over total holiday arrivals 40% AKL Arrival 30% CHC Arrival 20% 10% 0% 2003 2004 2005 2006 2007 Source: Statistics NZ 15
Slide 17: Cargo growth significantly below potential
CARGO GROWTH SIGNIFICANTLY BELOW POTENTIAL For personal use only Cargo NZ sea freight World air • Auckland cargo cargo significantly trailing benchmarks Auckland • Anecdotal evidence cargo points to current cargo practices and facilities stunting growth • Exporters have goods available and are willi
Slide 18: Aeronautical Division Presentation
For personal use only Aeronautical Division Presentation
Slide 19: Background – Aeronautical Division
BACKGROUND – AERONAUTICAL DIVISION For personal use only Aeronautical revenue 2008 % of total revenue Airfield income $70.1m 19.9% Passenger Service Charges $66.9m 19.0% Terminal Services Charges $22.9m 6.5% Total Aeronautical Revenue $159.9m 45.5% Aeronautical charges: – Airfield charges calculated
Slide 20: Key aeronautical initiatives
KEY AERONAUTICAL INITIATIVES For personal use only • Lean process improvement: – Passengers – Aircraft movements – Cargo • Improve workforce productivity • Develop differentiated service lines for airlines and low cost carriers in particular (Good, Better, Best) • Offer a range of service experience
Slide 21: Costs - we won't save our way to prosperity
COSTS - WE WON’T SAVE OUR WAY TO PROSPERITY BUT WE WILL GET THEM DOWN For personal use only • Half the operating costs are fixed. Only 20% of costs (approximately $40m) are controllable • Capital related costs represent 60% of total pre-tax costs • Change in capital spend and capital allocation key
Slide 22: Turnaround charges for a B777-200ER
TURNAROUND CHARGES FOR A B777-200ER For personal use only Source: Jacobs Consultancy 2009 21
Slide 23: Turnaround charges for a B737-300
TURNAROUND CHARGES FOR A B737-300 For personal use only Source: Jacobs Consultancy 2009 22
Slide 24: Lean Six Sigma pilot study – arrivals process
LEAN SIX SIGMA PILOT STUDY – ARRIVALS PROCESS For personal use only 23
Slide 25: Capital spend
CAPITAL SPEND For personal use only • Pier B recently completed • Northern Runway under construction • Terminal 3B on hold 24
Slide 26: Retail Division Presentation
For personal use only Retail Division Presentation
Slide 27: Background – Retail Division
BACKGROUND – RETAIL DIVISION For personal use only • Retail Division revenue in 2008 was $132.7m – contributing 38% of total revenue • Retail Division revenue includes: – Duty free (on and off airport) – Foreign exchange – Food and beverage – Specialty retail – Car Parking • Retail income is based o
Slide 28: Driving retail performance
DRIVING RETAIL PERFORMANCE For personal use only • Adopting proactive landlord approach • Understanding retail revenue drivers • Maximising the dual duty-free operator model • Lifting retail operational performance • Improving the retail experience • Linking optimal retailer mix to customer needs an
Slide 29: Move from passive to proactive landlord model
MOVE FROM PASSIVE TO PROACTIVE LANDLORD MODEL For personal use only All Profits Profits Car parking less fee • Retailing is not Share of traditionally a core skill Advertising profits Food & Bev of an infrastructure operator Return Share of upside • However investment in active management of Duty Fr
Slide 30: Understanding the retail revenue drivers
UNDERSTANDING THE RETAIL REVENUE DRIVERS For personal use only 3 People Conversion Average Concession terms Retail Revenue Transaction # x % x $ x % = $$$ Volumes Dwell time Operational expertise Product category Demographics Retail mix Management Margin Purpose of Comfort levels service levels Cont
Slide 31: Maximising the dual duty-free operator model
MAXIMISING THE DUAL DUTY-FREE OPERATOR MODEL For personal use only • Opportunities – Widen consumer offers in sub categories – Competition will grow awareness and stimulate demand – Lift operational overall effectiveness for airport retailing – Chance for flexible and innovative approach to product
Slide 32: Lifting retail operational performance
LIFTING RETAIL OPERATIONAL PERFORMANCE For personal use only • Better understanding of customer needs and behaviours and tune offers accordingly • Addressing current customer perceptions about airport retail • Driving retail conversion/average transaction value by supporting retailers’ operational p
Slide 33: Improving the retail experience
IMPROVING THE RETAIL EXPERIENCE For personal use only • Airside passenger spend rate (PSR) 3-4 times higher than landside • Improve PSR by changing retail balance to 70% airside • Improve duty free penetration by introducing walk through duty free shops • Increase dwell time by: – Intuitive way find
Slide 34: Car parking facilities improving
CAR PARKING FACILITIES IMPROVING For personal use only International terminal Domestic terminal Park & Ride • Proximate short-term and long- • Multi-level car park with direct • Opened December 2008, term parking options connectivity into terminal • 650 parking bays • 3,200 public parking bays, plus
Slide 35: A competitive market in parking
A COMPETITIVE MARKET IN PARKING For personal use only • 12 separate parking operators, predominantly in the Airport Oaks area • Over 3,500 parking bays off-terminals • Wide range of competitive pricing option eg, book a trans-Tasman flight and get 7 days free parking • In addition to off-airport ope
Slide 36: Customer segmented approach to parking products
CUSTOMER SEGMENTED APPROACH TO PARKING PRODUCTS only usefacility • Business travellers • Single and multi-day personal value of parking • Meeters / Farewellers • Quick Parkers • Same day travellers • Value seeking longer-term parkers ForPerceived • Predominantly leisure travellers Length of stay 35
Slide 37: Property Division Presentation
For personal use only Property Division Presentation 36
Slide 38: Background – Property Division
BACKGROUND – PROPERTY DIVISION For personal use only Investment Property Revenue $21m Investment Property Value 2006 -2009 600 +$194m 500 -$41m 400 +$136m 233 Development $m 300 land 524 $483m $193.5m Developed 200 250 Land All developed land and buildings 329 Developed 100 193 0 June 2006 June 2007
Slide 39: Portfolio make-up
PORTFOLIO MAKE-UP For personal use only Current land holding Unserviced Land 100% = 1,551 ha • North Airport (152ha) Developed and tenanted land • Golf Course (45ha) • Limited immediate development potential (117ha) Serviced unavailable land • Craigie Trust Claim (36ha) • Manu Tapu (2ha) • Runway* D
Slide 40: Recent land absorption rates in Manukau
RECENT LAND ABSORPTION RATES IN MANUKAU For personal use only Manukau land absorption rate, percent 100% = 64ha 70ha 47ha • The average industrial land absorption rate in Manukau is Other 27.2 24.5 TBA estimated at 48 ha/p.a. (based TBA on 12 year analysis) Airport 6.7 12.6 East Tamaki TBA • Long ru
Slide 41: Reinvigorate and grow property development
REINVIGORATE AND GROW PROPERTY DEVELOPMENT For personal use only • The last development project undertaken by the airport property group was Expeditors committed in September 2005 and completed in February 2007 • Auckland Airport has 363ha of land identified for development, representing a significa
Slide 42: Property – three core strategies
PROPERTY – THREE CORE STRATEGIES For personal use only LOCATION OF CHOICE • For airport-related businesses, identify ways to leverage better the Airport proximity and operations, resulting in higher revenues through rents, concessions or licences • For other businesses, leverage Auckland Airport as
Slide 43: Property – strategy implementation
PROPERTY – STRATEGY IMPLEMENTATION For personal use only From To Implications • Location of choice • Location of choice on • Faster land because of airport broad range of absorption and attributes higher value use options • Location based customer • Customer aligned • Global logistics focus “propert
Slide 44: Corporate Presentation
For personal use only Corporate Presentation
Slide 45: Key corporate initiatives
KEY CORPORATE INITIATIVES For personal use only • Work to create a more stable commercial environment including working to define and stabilise the regulatory environment • Implement new Capital Allocation approach reflecting new strategy • Investigate Step-Out opportunities • Review and lock-down c
Slide 46: Regulatory environment - background
REGULATORY ENVIRONMENT - BACKGROUND For personal use only • The Airport Authorities Act (AAA) requires Airports to act commercially and in view of the differing business drivers of airports and airlines and the need for timely investment, the AAA provides for: – Dual till pricing environment – Consu
Slide 47: Regulatory environment – what's changed
REGULATORY ENVIRONMENT – WHAT’S CHANGED For personal use only FROM - AAA TO - CAA - Dual till - Dual till - Consultation process - Consultation process - Information disclosure - Information disclosure - Airport sets disclosure inputs - Com Com recommends disclosure inputs PROCESS OF REVIEW – COMMER
Slide 48: Stable commercial environment
STABLE COMMERCIAL ENVIRONMENT For personal use only • Focussed on providing options which fill out the demand curve • Need to facilitate a healthy stable of airlines with differentiated market propositions (low cost, full service, premium etc) • Want our airline customers to be profitable and sustai
Slide 49: Capital allocation programme
CAPITAL ALLOCATION PROGRAMME For personal use only We have risk-assessed the capital spend plan in terms of current requirements and will be working to address the possible challenges. There will be a focus on “sweating the assets”. Area of Spend Comments Growth (or capacity) The prior years of inve
Slide 50: Airport planning horizons
AIRPORT PLANNING HORIZONS For personal use only 49
Slide 51: Carefully selected step-outs aligned to core competencies
CAREFULLY SELECTED STEP- OUTS ALIGNED TO CORE COMPETENCIES For personal use only • Opportunities exist for us to leverage our underlying operational capabilities and customer relationships to grow beyond the Auckland Airport business or STEP-OUTS grounds. Examples include: – Airport sector - conside
Slide 52: Questions
For personal use only Please Questions 51
Auckland International Airport — Investor Day (March 2009) on 6ix