NZ Airports Magazine November2018
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OFFICIAL MAGAZINE OF THE NEW ZEALAND AIRPORTS ASSOCIATION November 2018 NEW ZEALAND AVIATION AT THE TIPPING POINT, AN INVESTOR’S PERSPECTIVE ON AIRPORT INFRASTRUCTURE, MINISTER OF TRANSPORT’S ADDRESS TO THE SECTOR, INCLUSION AND AGILITY IN THE WORKPLACE, COMMUNITY CONSULTATION IN QUEENSTOWN, AIRPORTS AND DRONES, AND AIRPORT AWARDS In this edition ... A New Zealand Airport Outlook – at the Tipping Point? ..........p2 Airports Sign to Climate Change Coalition .....p3 Welcome to Conference .......p5 Minister’s Address ................p6 A Perspective from the Boardroom ......................p8 Extensions Underway at Whakatāne Airport ............p9 A Long-Term Investor’s Perspective on Infrastructure ......................p10 Airport Pricing and Upgrades ..................... p11 Auckland’s The Mall Goes Live ...........................p13 Details of “Iconic” New Gisborne Airport Terminal Announced ...........p13 Wellington and Auckland Airports Claim Awards ........p14 What’s all the Noise About? Long-Term Planning and Community ..................p18 Wanaka Airport Planning Progresses ..........p20 A New Age in Aviation – Future Aerodromes and Drones .........................p21 Images from Conference ....p23 Level 8, Midland Chambers, 45 Johnston Street, Wellington | PO Box 11369, Manners Street, Wellington 6142 | +64 4 384 3217 | nzairports.co.nz A New Zealand Airport Outlook – at the Tipping Point? NZ AIRPORTS CONFERENCE 2018, DUNEDIN In a live video feed from Australia, CAPA – Centre for Aviation executive chairperson Peter Harbison examined the strategic options for airlines in changing economic conditions and the consequent impact those might have on growth and route development. Reviewing market trends over recent targeting a slight rise in its ROIC from Emphasising the importance of years, he noted passenger volume 14.5% in 2018 to 15%, and was also airline partnerships in times of stress, had grown strongly, load factors had advancing a slight, overall increase Mr Harbison noted various moves remained steady and in combination in capacity. being explored by the relevant carriers with a plunge in oil prices, average within both global alliances and Conservative growth in capacity ticket prices had dropped markedly bilateral partnerships. was noted on New Zealand’s main while airline profits had grown strongly. domestic routes over the past two The United States and China were However, describing 2017 in particular years, although with routes such as highlighted as two key long-haul as being a fairytale year, Mr Harbison Auckland-Dunedin having experienced international growth markets, with observed that the industry was now standout increases. Air New Zealand noted to currently coming off an all-time-high – with some speculating a global economic recession may be on the horizon. “In 2017, synchronised global growth and low oil prices and interest rates provided ideal conditions,” he said. “Share markets rose, conditions were ideal for aviation growth and outsize growth occurred – well above long-term trends. Today, oil is up, United States interest rates are rising, global trade is being challenged, markets are skittish and Trump uncertainty abounds.” Given the rising cost of fuel – which typically accounts for 15% to 40% of total airline costs – looming large, hedging was observed as only providing temporary relief. Examining the pre-emptive options available to airlines in preparation for a downturn, Mr Harbison predicted cautious, strength-focused expansion, avoidance of chasing traffic in very price-sensitive markets and greater reliance on partnerships. Having achieved a 20% return on investment capital (ROIC) in 2018, Qantas and Jetstar were now noted to be targeting 15% with Qantas observed to be reducing domestic capacity while Jetstar remaining steady Peter Harbison in live video feed with MC Megan Crawford from Dunedin Airport in that regard. Air New Zealand was 2 NZ Airports Magazine | November 2018 have a 90% end-to-end market share “Broadly speaking, consumers (and were noted to be key drivers in the former and 21% in the latter. airports) should benefit – or at least of customer choice. not be significantly harmed.” In regard to the Tasman market – Turning the focus to Jetstar, in which Air New Zealand is the Flow on effects to the Tasman market Mr Harbison noted the carrier was largest operator with 34% share were predicted to include an overall in the throes of deploying long-haul, – capacity was observed to have increase in capacity, introduction of narrowbody aircraft to open up new stabilised following the withdrawal new city-pair routes as well as greater routes and expand its international of Emirates Airline. innovation as airlines competed more network from Australia. This had not aggressively and added new been possible with previous A320 However, Air NZ is in the throes of aircraft types. aircraft and was also freeing some increasing New Zealand-Brisbane Boeing 787s for deployment to other capacity by 44% and Virgin has “The entry of Tigerair should new destinations. announced a seasonal Newcastle- stimulate more low-fare competition. Jetstar was noted to be receiving its Auckland service. Air New Zealand has a handicap in competing with low-fare/no-frills first four A321neoLRs in the second On the Qantas-Air New Zealand competition as it can undermine its half of 2020, with Air New Zealand also codeshare, Mr Harbison emphasised brand/yield advantage – therefore having ordered 11 such aircraft. that this applies only to each carrier’s probably expect some additional Mr Harbison concluded his domestic networks. Jetstar service, depending on the level presentation with the observation that of Tigerair entry.” “It’s an unusual arrangement because for a typical Jetstar Sydney-Auckland it can’t include actually codesharing The codeshare was also expected return flight costing A$394, government charges entailed about A$125. on the Tasman itself. The pair have to provide the partnership with a too dominant a position for that to be considerable edge on frequent flyer “This is effectively a tax on regions. allowed – about two-thirds share by programmes and corporate deals as Removing that charge would stimulate seats, including Jetstar. well as on routes and frequency, which travel by up to 50%. Make a noise!” Airports Sign to Climate Change Coalition Iain MacIntyre Auckland Airport, Wellington Airport and Christchurch Airport are among signatories to the recently-launched Climate Leaders’ Coalition. To date, about 60 New Zealand “The chief executives all recognised “They are also calling for other leaders businesses are understood to have and agreed that there was a clear to join them.” joined the coalition, which aims to need for collective action, to drive “help New Zealand transition to a meaningful and impactful change and Statement low-emissions economy and create lower Aotearoa’s emissions,” states Parties joining the coalition are required a positive future for New Zealanders, the organisation. to sign its Climate Change Statement business and the economy”. “Leaders involved are viewing climate and therefore commit to the measures According to the coalition’s Website, change as an opportunity for their contained therein. The following is that membership provides 22% of directly quoted from that statement. business to innovate and access new the country’s private sector GDP and markets, with many already eager to For the generations after us, for the employs 127,000 New Zealanders, country we love, for the viability of while also currently contributing almost realise the potential, having multiple our businesses, we are ambitious for half of New Zealand’s gross emissions. initiatives and actions underway. action on climate change. If we act Officially launched on July 12 this “In addition to committing to the now we can forge a path to create a year, the concept of the coalition and [Climate Change Statement], the future that is low-emission, positive its representative Climate Change businesses involved in the Climate for our businesses and economy, and Statement was fostered in an October Leaders’ Coalition are also dedicating inclusive for all New Zealanders. We 2017 meeting attended by a number considerable resources, expertise and are committed to playing our part to of chief executives from leading funding towards projects which centre make that future real. If we don’t, our Kiwi businesses. around solutions-driven thinking. competitiveness is at risk. Level 8, Midland Chambers, 45 Johnston Street, Wellington | PO Box 11369, Manners Street, Wellington 6142 | +64 4 384 3217 | nzairports.co.nz 3 We take climate change seriously in we work with our suppliers we support introduction of a our business: to reduce their greenhouse climate commission and carbon gas emissions we measure our greenhouse budgets enshrined in law We believe the transition to a low gas emissions and publicly emissions economy is an opportunity Further information – including case report on them to improve New Zealand’s prosperity: studies, an events calendar and other we set a public emissions we support the Paris Agreement resources – is accessible via <https:// reduction target consistent with and New Zealand’s commitment www.climateleaderscoalition.org.nz/ keeping within 2° of warming to it news-and-resources/resources>. Airports’ Initiatives Iain MacIntyre New Zealand’s major airports have made a clear commitment to reducing the climate change impact of their business operations. Auckland Airport Wellington