Auckland International Airport Limited · NZX:AIA
Auckland International Airport — Investor Day (June 2011)
96 slides from Auckland International Airport's investor day presentation, Jun 16, 2011
Slide 1: Auckland International Airport Limited Investor Day
Auckland International Airport Limited Investor Day 16 June 2011
Slide 2: Agenda
Agenda 9.00am Introductions 9.05am Continuing the growth trajectory (Simon Moutter & Simon Robertson) 10.00am Break 10.30am Shaping markets for faster growth (Glenn Wedlock) 11.30am Sustaining our retail growth trajectory (Adrian Littlewood) 12.00pm Lunch 1.00pm Property momentum (Pete
Slide 3: Continuing the growth trajectory
Auckland International Airport Limited Investor Day 16 June 2011 Continuing the growth trajectory
Slide 4: Our vision is clear
Our vision is clear To build a great New Zealand business recognised as a world leader in creating value from modern airports Our vision is clear and focussed on our core competencies Our skill in managing the large scale movement of people in an Airport Our highly effective concession/outsource
Slide 5: Strategy evolves as business grows
Strategy evolves as business grows Two years of directional clarity, boldness and strong execution is paying off We have closed the capability gaps in our transformation from an infrastructure builder to a sales-led driver of growth Six years of flat underlying profitability of about $105m is behind
Slide 6: Outline of June 2011 business strategy
Outline of June 2011 business strategy Strategic Themes Negotiate Win Win Commercial Fuel growth through aeronautical commercial arrangements which deliver long-term Frameworks superior value to regulated posted-terms Drive Growth in Tourism and Drive a sustainable upward shift in New Zealand touris
Slide 7: Negotiate win-win commercial frameworks
Negotiate win-win commercial frameworks Not all airlines have the same growth ambitions, risk appetite or business model A one size fits all approach to commercial arrangements limits how our airline partnerships can be grown Auckland Airport will engage with any airline that has a desire to have an
Slide 8: Negotiate win-win commercial frameworks - regulatory
Negotiate win-win commercial frameworks - regulatory Auckland Airport is investing in changes to systems and reports in preparation for the first information disclosure reporting in May 2012 Also underway is a revaluation of land as at 30 June 2009 and 30 June 2011 in accordance with the MVAU method
Slide 9: Driving growth in tourism and trade
Driving growth in tourism and trade We know that international passenger volumes are a significant value driver for Auckland Airport 2009 International passengers (excl. transits) Our 2009 aspirational goal to grow international planning assumptions per financial year (000's) passengers by 2 million
Slide 10: Sustaining our retail growth trajectory
Sustaining our retail growth trajectory Strong retail growth in the current year driven significantly by the new passenger experience in international departures Strong car parking growth in current year driven significantly by online booking channel increasing utilisation and allowing targeted prom
Slide 11: Sustaining our property growth trajectory
Sustaining our property growth trajectory Our property growth strategy is to have a clear property proposition, increase amenity and gain critical mass to leverage opportunities between each property precinct We have developments underway or just finished in accommodation, industrial and office segm
Slide 12: Deliver a smarter airport experience
Deliver a smarter airport experience This new strategic theme ensures that our short- term and long-term airport infrastructure provides the quality experience demanded by passengers Links to changing technologies and innovation to improve departures, arrivals and border initiatives Efficient airpor
Slide 13: Why masterplanning is a key component of strategy
Why masterplanning is a key component of strategy A320-200 fleet up gauge impact on the DTB will be significant Between FY 11–16, Air NZ will take delivery of 14 Airbus 320-200 jets, each configured 1,500 to seat 171 passengers 1,450 This compares with the 133 seat 1,400 configuration of the Boing 7
Slide 14: Impact of pax growth on DTB service experience
Impact of pax growth on DTB service experience The domestic terminal is currently ~27% undersize for its peak busy throughput, based on IATA standard C (represented by the shaded green area). Absent any intervention, the service experience will continue to slide to the bottom of the IATA scale. 14
Slide 15: Together with airlines we will find the path for a better solution
Together with airlines we will find the path for a better solution We are working towards identifying the best solution with our domestic airlines. Options include investing in the current DTB location - lower initial cost - probably a medium-term solution Or investing in a new DTB to the north of t
Slide 16: Maximising beneficial airport partnerships
Maximising beneficial airport partnerships Driving value from our positions in NQA and Queenstown enables Auckland Airport to share in the growth of fast growing airports NQA improvement milestones for FY11 are on track to be surpassed Queenstown legal position behind us and actual performance is ab
Slide 17: Providing outcome focused leadership
Providing outcome focused leadership We know that strong internal leadership qualities will transfer into higher value creation We are a leading company in supporting, promoting and building New Zealand tourism Strong internal and tourism leadership will lead to heightened growth outcomes for Auckla
Slide 18: Our growth is supported by a strong balance sheet
Our growth is supported by a strong balance sheet Our debt levels have remained constant FFO To Total Debt since 2008 18.00% A A- 17.00% Gross interest costs (excluding 16.00% capitalised interest) has been falling from 15.00% 2009 while cash flow has been increasing 14.00% Jun-06 Jun-07 Jun-08 Jun-
Slide 19: Our big targets
Our big targets Our aspirations for growth are strong. We are excited by the growth potential of the business and continue to challenge our people, the markets and our investments in assets to deliver results beyond planning assumptions We are having success on the path to our big targets including:
Slide 20: Our big targets
Our big targets Our aim is to grow international passenger numbers (excluding transits) by 2 million movements by FY14 We believe that the greatest opportunity for passenger movement growth in the medium and long-term is from Asia. Therefore we will focus our efforts to capitalise on the Asian oppor
Slide 21: Impact of natural events/disasters
Impact of natural events/disasters Long-term impact of Christchurch, Japan, and Chile ash cloud events still not yet known Has been some short-term and modest impact on traffic flows to NQA, ZQN and Auckland Impact of Japan on Cairns likely to slow the very strong growth momentum experienced this fi
Slide 22: The case for investment
The case for investment Low risk exposure to Asia–Pacific growth story Ownership position in four airports all with considerable upside potential Growth strategies succeeding in growing passenger volumes, aero revenues, retail yields and property rents and plenty more to come Strong Balance Sheet wi
Slide 23: Questions
Questions __——_—_—_—_—_————————— ne A Auckland Airport 23
Slide 24: Shaping markets for faster growth
Shaping markets for faster growth NZ determination
Slide 25: Shaping markets for faster growth
Shaping markets for faster growth We aim to influence the shape of travel market to open opportunities faster than they would otherwise occur We focus on where we believe the opportunities are the greatest We will work with multiple parties to maximize opportunities, open new markets and/or ease the
Slide 26: Market structure as a driver of growth
Market structure as a driver of growth To drive our business value we must drive growth and residual value. Given capital intensity we need to develop the right market structure and our competitive position. Market Growth Market Structure Market Position Business Value 26
Slide 27: Market structure as a driver of growth
Market structure as a driver of growth Primary benefit is a platform we call convenience. To understand the market structure we question aspects of the market eg: • Where are the players positioned? • What is the shape and size of the market and is this desirable? • What are the market leading indic
Slide 28: Market structure as a driver of growth
Market structure as a driver of growth We then consider a possible future view and then question: • Is it desirable? • What are the implications for customers? • How do we shape the market? • Product implications? • What is the risk? Source: SABRE ADI 28
Slide 29: Where can we build utilisation and connection
Where can we build utilisation and connection To grow markets we need to ensure we have the capacity to capture opportunities. Long haul flights build utilisation across the day to build into hub waves. Thursday 1600 1400 1200 Pax Number 1000 800 Arr 60 Min 600 400 200 0 Time of Day Thursday 2500 20
Slide 30: Population size of countries accessed by direct flight
Population size of countries accessed by direct flight is important to understand market opportunities Source: ASPERION 30
Slide 31: As is understanding population wealth characteristics
As is understanding population wealth characteristics 31
Slide 32: Freight volumes provide a market opportunity
Freight volumes provide a market opportunity Organic growth forecasts of 3.2%. For 12 months ending April total airfreight volumes increased by 2.2%. April month was up 12.5%. Source: EAGLE I 32
Slide 33: As some routes are constrained for freight
As some routes are constrained for freight Target 29 weekly 777-200 to meet organic growth with North Asia begin identified as constrained Source: EAGLE I 33
Slide 34: Growing markets will get our attention
Growing markets will get our attention 120,000,000 Outbound Trips from China 100,000,000 80,000,000 60,000,000 2010 Forecast 2011 40,000,000 Forecast 2020 20,000,000 0 2010 Forecast 2011 Forecast 2020 Source: WTO, BCG 34
Slide 35: China is volume and massive wealth!
China is volume and massive wealth! • 1.34 billion people • China replaced the United States as NZ's second-largest export market at US$2.66 billion • 57 million outbound trips in 2010 • NZ currently 0.2% of market • One in every 175 people in Shanghai has personal wealth of US $1.5 m • Estimated 4,
Slide 36: Development of high value travel from China
Development of high value travel from China Source: BCG 36
Slide 37: Routes – Competition for aircraft is fierce
Routes – Competition for aircraft is fierce Facts • 2 Days • 350 Airlines • 750 Airports • 2300 Attendees • 28,000 Meetings 37
Slide 38: The Development Playbook!
The Development Playbook! •Easy- Air rights, Visas, Distribution, Network fit •Strategic Imperative: create case, resolve issues, buy in from partners, building influence, creating opportunity cost, regional/alliance strategy link •Great value & result: Comparative advantage, growth, support, develo
Slide 39: Market Development Loop
Market Development Loop Learning from results to improve our knowledge and develop sustainable Target growth market market structure segments through considered and detailed Market analysis of markets Development Securing capacity growth is a fundamental outcome Model & of the demand stimulation Tec
Slide 40: Need to stand out from the crowd
Need to stand out from the crowd 40
Slide 41: As opposed to hiding in the detail
As opposed to hiding in the detail In Guangzhou there was previously limited promotion as less capacity available to potential customers 41
Slide 42: To create greater awareness
To create greater awareness Guangzhou Daily Travel session: 4th Jan 2011 GZL & AIAL JV adverts about CNY and high season products 42
Slide 43: To further develop greater connections and more capacity
To further develop greater connections and more capacity 43
Slide 44: We are connected well to the World
We are connected well to the World 44
Slide 45: Commitments for in excess of 1.3m international seats in last 2 years
And we have gained commitments for in excess of 1.3m international seats in the last 2 years 45
Slide 46: Asia is NZ Tourism's growth engine
Asia is NZ Tourism‟s growth engine NZ Arrivals Growth as at YE March 2011 60,000 40,000 20,000 0 Asia Africa and the Americas Oceania Europe Middle East -20,000 -40,000 -60,000 Source: IVA 46
Slide 47: Building alliances can stimulate markets
Building alliances can stimulate markets 47
Slide 48: Recognising a problem when you see one
Recognising a problem when you see one 48
Slide 49: Our leading value growth markets are Korea and China
Our leading value growth markets are Korea and China Markets by Tourism Export Value NZD Million YE March 09 YE March 10 YE March 11 1,768 1,616 1,639 916 729 599 612 531 458 448 360 392 348 308 295 268 277 269 248 207 186 Australia UK USA China Japan South Korea Germany Source: IVS 49
Slide 50: We need to change to get parity with Australian industry value
However, we need to change to get parity with Australian industry value Tourism Expenditure Value NZ v Aus YE Dec 2010 AUS NZD YE Dec 10 NZ NZD YE Dec 11 $3,364 $2,437 $2,093 $1,497 $1,624 $1,291 $1,264 $987 $668 $362 $465 $321 $218 $261 Source: IVS, Tourism Australia 50
Slide 51: Competing with Australia – International Arrival Forecasts
Completing with Australia – International Arrival Forecasts Source: Tourism NZ, Tourism Australia 51
Slide 52: Existing First & Business Class demand generates 42% premium loading
Auckland‟s existing First & Business Class demand generates a 42% loading in Premium seats 52
Slide 53: Premium seats at AKL expected to rise by 113k
Over the coming year, premium seats at AKL are expected to rise by 113k, or 11% 53
Slide 54: Premium Cabin Yields: North East Asia
Premium Cabin Yields: North East Asia (excluding Mainland China) 54
Slide 55: Yield is also an issue for air freight exports
Yield is also an issue for air freight exports Source: EAGLE I 55
Slide 56: 1.2m O/D passengers per year between Asia & Latin America
There are 1.2m O/D passengers per year between Asia & Latin America 56
Slide 57: Auckland is ideally located to capture Latin America-Asia traffic
Auckland is ideally located to capture Latin America-Asia traffic 57
Slide 58: What could it look like?
What could it look like? Our competitive advantage – Seasonality opposite to northern hemisphere – Appealing and safe destination – Proximity to Australia – AKL is New Zealand‟s hub – Gateway Americas– Australasia – Gateway Americas–Asia 58
Slide 59: Concentrate our marketing spend in Asia, Americas and supporting markets
To influence we will concentrate our marketing spend in Asia, Americas and supporting markets Breakdown of Spend by Region FY 2011/12 6% 6% 9% Nth Asia/Eur Sth Asia/Eur 46% Americas 13% Emerging Australia Domestic 20% 59
Slide 60: Future story….
Future story…. • Easiest and most desired route for customers moving between Asia, Australasia & Americas • High value passenger and freight development • #1 Dynamic Capacity Development 60
Slide 61: Our conclusions
Our conclusions Opportunities for market development include: • The fast growing markets of Asia • Lifting yield on premium to lift the airline value proposition • Ensure freight opportunities are maximised for overall airline profitability • Remove impediments to growth (air rights, visas etc) • Le
Slide 62: Questions
Questions __——_—_—_—_—_————————— ne A Auckland Airport 62
Slide 63: Sustaining our retail growth trajectory
Auckland International Airport Limited Investor Day 16 June 2011 Sustaining our retail growth trajectory
Slide 64: Summary of retail business at Auckland Airport
Summary of retail business at Auckland Airport • 102 retail sites with 71 different concepts • 35 operators • Two full service duty free operators with total of 6 duty free stores • 18m+ combined visits a year to our two terminals 64
Slide 65: Past year has focused on delivering ideal retail environment
Past year has focused on delivering ideal retail environment and reset of commercial & operational foundation Retail Strategy shared in May 2010 1 Deliver a high quality retail experience Over past year our focus has been here 2 Set strong operational & commercial foundations 3 Adopt whole of airpor
Slide 66: Deliver a high quality retail experience
Deliver a high quality retail experience • Unique, award winning 1 retail environment • Strong sense of „NZ‟ in common area and retailer selection • Outcome held true to retail strategy set at start • Opportunities remain for regular retail change out to maintain shopper engagement • Now in fine tun
Slide 67: Set strong operational & commercial foundation
Set strong operational & commercial foundation • Refreshed retail mix during 2 redevelopment • Exit of 21 year old HMSHost/AIAL JV • Driven retailer consolidation to build local scale and capability • Reset of 60% of all ITB retailer commercial terms – retained excellent upside exposure with strong
Slide 68: Adopt whole of airport approach to drive retail performance
Adopt whole of airport approach to drive retail performance 3 • On-going investment in measurement and data management tools e.g. door counters, data warehouse • Working to near real–time reporting for key retailers – allows faster decision making • Working closely with Aero team to remove barriers
Slide 69: Apply our scale to support retailer performance
Apply our scale to support retailer performance 4 • Lifting marketing performance – increasingly targeting Chinese/Australians • Strong operational audit programme in place resulting in improved retailing standards • Continuing retail operational and sales training – focusing now on Asian market • H
Slide 70: Retail performance showing significant improvement
Retail performance showing significant improvement despite on-going redevelopment MoM Total ITB Retail Sales • Recent and consistent % Change (excl FX) improvement in sales suggests 16% new retail environment is working 14% ITB project • While FX rate changes may Change per month compared to PCP 12%
Slide 71: Summary of parking business at Auckland Airport
Summary of parking business at Auckland Airport Car park product offering at Auckland Airport International Terminal Domestic Terminal Park & Ride Proximate short-term and Multi-level car park with Opened December 2008 long-term parking options direct connectivity into terminal 2,928 public parking
Slide 72: Parking business transformed to yield management model
Parking business has been transformed to yield management model • Capability upgrade combined with new online booking tool enabled launch of dynamic product and price management in May 10 • Adopted best of breed hosted model rather than customised solution – helped speed to market • Can create new (
Slide 73: Growth since launch has outstripped passenger growth
Growth since launch has outstripped passenger growth • Significant growth in target segments/products over prior year: – Long term volumes +26% – Business Express occupancy +85% with limited product cannibalisation for travel of 1 day+ • ~20%+ of total transactions from online booking (excluding mee
Slide 74: Focus will be maximising potential of new yield model
Focus will be maximising potential of new yield model • Continue to improve product: – Adding new/repurposing existing capacity to service higher demand from public and local staff – Improve quality of physical parking product – Improving online tool and back-end capability to improve sales options
Slide 75: Questions
Questions __——_—_—_—_—_————————— ne A Auckland Airport 75
Slide 76: Property momentum
Auckland International Airport Limited Investor Day 16 June 2011 Property momentum
Slide 77: Canals, railroads and highways ... air transportation
Canals, railroads and highways have, channelling the flow of the traffic, created urban alignments, hinterlands and nodal points. Now air transportation promises to become a vital factor - Edward JT 1956
Slide 78: Development of Airports and Cities
Development of Airports and Cities 1950‟s – Airport Airport remote from City 1970‟s – Airport City Airport remote from City but self contained, City grows towards Airport Today – Airport Corridor & Aerotropolis Airport with many of the activities of a centre or suburban business district, but integr
Slide 79: Auckland Airport Business District
Auckland Airport Business District • Flexibility • Security • Amenity
Slide 80: Market Summary
Market Summary Market Stock Vacancy Absorption Rents Cap rates Ave Value Forecast pa $/m2 CBD Office 1,369,736 13.8% 22,158 $224 9.43% $2,375 Non CBD Office 1,531,202 13.2% 27,211 $221 8.83% $2,503 Warehouse 11,280,768 4.5% 232,679 $107 8.29% $1,291 Retail (Sub 56,085 0.1% - $973 8.67% $11,223 Regio
Slide 81: AIAL Portfolio Snap Shot
AIAL Portfolio Snap Shot FY12 Rent Roll by Precinct Terminal Zone, 0.7% FY12 Rent Roll by Category Other, 2% Hotel, 4% Altitude, 6.2% The Commercial, Common, 11% 4.5% Retail, 6% Office, 7% Occupancy FY11 WALT 100% 5.2 > 99% 5 98% f 48 aS a 97% 7 4.6 96% |< 44 95% 4.2 9AM Br a a a a ce oeo oO OO Ht H
Slide 82: Portfolio Comparison
Portfolio Comparison Occupancy WALT Market Cap Rate DNZ Property 96% 4.4 8.7% Argosy 96% 5.3 8.8% Goodman 95% 5.5 8.1% AMP NZ Office 92% 4.6 8.1% Kiwi Income 97% 4.2 8.0% PFI 99% 4.1 8.8% Industry Ave 95% 4.9 8.6% AIAL 99.5% 5.1 8.3% # Source FNZC: “NZ Property Play” (18 May 2011)
Slide 83: Portfolio Comparison
Portfolio Comparison HIGH GROWTH LOCATION SINGLE LOCATION, SECTOR DVERSITY Office Industrial Retail Commercial Other DNZ Property 40% 27% 12% 21% 0% Argosy Property 29% 35% 36% 0% 0% Goodman Property 33% 29% 0% 25% 13% Auckland Airport 7% 49% 6% 11% 27% # Source: Latest listed Annual Reports
Slide 84: Inventory for Property Development
Inventory for Property Development Size Ha Value $ / m2 The Quad 13.6 14.5 107 The Landing 166.7 104.9 63 Altitude 13.0 12.8 98 The Common 53.2 17.2 32 Cargo South 0 0 0 Terminal zone 0.4 1.1 254 Cargo North 7.7 18.3 239 Other 87.5 11.4 13 Total* 342.0 180.2 53 *Total excludes land impacted by fligh
Slide 85: Auckland Airport Business District: The Landing
Auckland Airport Business District The Landing Quantum - Plan change Land available for development 120 ha approx operative Absorption Akl Forecast pa (ave 5 years) 232,679 - 4 New buildings - Warehouse (NLA) complete or Absorption Airport Mkt1 last 12 months 43,572 under Rents (blend office/warehou
Slide 86: Auckland Airport Business District: The Quad
Auckland Airport Business District The Quad Quantum - Concept Land available for development 10 ha approx advanced Non CBD Office forecast Akl Absorption 27,211 - 3 New buildings (ave 5 years) under Absorption South Akl Mkt1 last 12 months -7,807 construction Non CBD Grade A Rents (face high) 355 -
Slide 87: Auckland Airport Business District: Altitude
Auckland Airport Business District Altitude • Strong fundamentals • Convenience centre fully leased • F1 success suggests latent demand • Concept „testing‟ modest expansion
Slide 88: Ae FEET EE | RARE OEE REEE ORE FRR RN
Ae FEET EE | RARE OEE REEE ORE FRR RN
Slide 89: Over 65,000 vehicles visiting the airport every day
Massive exposure with over 65,000 vehicles visiting the airport every day
Slide 90: New Zealanders surveyed have visited the airport
UU t 15° of New Zealanders surveyed have visited the airport at least once in the last 12 months* *Feb 09-Feb 10 TNS Research
Slide 91: People work around Auckland Airport
approximately 22 y people work around Auckland Airport, that’s more than Newmarket’s workforce* *New Zealand Retail Magazine Issue 661
Slide 92: Slide 92
Slide 93: Fundamentals of the Airport location support Altitude precinct
The Fundamentals of the Airport location support a greater opportunity in the Altitude precinct
Slide 94: Auckland Airport Business District Cargo – South and North
Auckland Airport Business District Cargo – South and North • Demand steady • 4 Percival Gull leased • Cargo Central – From 79% to 95% occupancy – Rent roll increased 32% in 12 months
Slide 95: Auckland Airport Business District: The Common
Auckland Airport Business District The Common • Amenity and Supportive Activity • Employees • Tourism/Visitors • Conferences • Initiatives – Abbeville Farm Estate – Campervan – Paintball – High-Ropes – Driving Range – Golf
Slide 96: Questions
Questions __——_—_—_—_—_————————— ne A Auckland Airport 96
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