Annual Information Disclosure Regulatory Performance Summary For the year ended 30 June 2019 Chief Executive’s report This is Auckland Airport’s second project in decades which will and decided to implement discounts disclosure relating to the five-year transform the main entranceway which had the effect of reducing pricing period from 1 July 2017 to 30 into the airport and provide for charges to airlines by $33 million over June 2022 (PSE3). It is an opportunity future growth; and the final three years of the current for us to report on our performance • Taxiway Mike and Lima airfield five-year pricing period – taking us since setting these prices and provide expansion – works are underway out to the 2022 financial year. This information that gives our stakeholders to convert 250,000m2 of land (~ represents a reduction in our five-year confidence that we remain focussed six rugby fields) at the western aeronautical pricing target return from on delivering for our customers now end of the airport into 18% more 6.99% to 6.62% after tax. and into the future. paved surface area for the airfield This is evidence of a regime, with a FY19 marked another year of progress including new taxiways and six clear regulatory oversight, which is towards Auckland Airport’s multi- new remote aircraft stands. working. Although we firmly believed billion-dollar investment programme Our broader infrastructure programme that our original target returns were to build the airport of the future. is significant to the country. We fully justified, we acknowledged that We are proud to be an important have to think long-term and make the Commerce Commission held economic engine for New Zealand, investment and aeronautical pricing a different view. The Commission making a significant contribution to our decisions that balance the needs of welcomed Auckland Airport’s revised community and helping to grow our current and future airlines, passengers, prices as a good result for consumers country’s success in travel, trade government agencies and wider New and which showed the benefits of and tourism. Zealand. Our ability to do this relies the current economic regulation. We on a statutory power to set charges, believe that following a long and Our ambition is to: which are rigorously scrutinised intensive process, the Commission, • build a vibrant transport, trade and by the Commerce Commission. airports and airlines now have clarity tourism hub that New Zealanders Airport economic regulation was on the performance outcomes are proud of; strengthened with amendments to expected under the Commerce the Commerce Act in 2018, which Commission’s regulatory regime. • support economic growth and clarified the process the Commission create enduring value in our and Government can use to intervene We have significant concerns regarding regions and cities; should they consider that Auckland a Government proposal to remove • be a good neighbour to our local Airport’s charges are not justified. the statutory power of airports to set communities; and charges, which would significantly In 2017 we announced our long- disrupt the stability of the regime and • operate sustainably. term aeronautical infrastructure make it very risky for regulated airports Our 30-year vision includes major investment programme and set prices to make today’s required once-in-a- upgrades to our terminal, airfield, for airlines which we considered generation investment in new ground transport and utilities were fair, competitive and in line airport infrastructure. infrastructure. Almost every part of with international standards. We Auckland Airport’s precinct will be were the first airport to apply the Despite the many uncertainties facing transformed. Commission’s new guidelines around the sector, Auckland Airport is getting the evidential standards required to on with delivering what is the largest We are pleased to report that justify airport specific target returns private infrastructure development significant progress has been made on that differ from its sector-wide airport Auckland will see over the next five the following anchor projects: WACC benchmark of 6.41%. In years; investment that is crucial for New Zealand. • completion of our multi-stage November 2018, following a lengthy 35,000m2 redevelopment of and detailed review, the Commission the international terminal concluded that our target return was departure area; not fully justified, despite our once in a generation investment programme. • the Northern Network – we have Adrian Littlewood Auckland Airport carefully considered awarded our largest roading the Commission’s additional guidelines Chief Executive Auckland International Airport Limited 1 Investing in sustainable growth and trade We are committed to growing our country’s that will add 105,000 seats and 4,855 tonnes success in travel, trade and tourism. of cargo per year commencing in November 2019; In the 53 years since Auckland Airport opened, the airport has evolved and grown from several • new flights between Auckland and Vancouver hundred thousand travellers in 1966 to over 21 from December 2019 that will add 31,000 million in 2019 - a number which is expected to seats per year and 650 tonnes of cargo; double again by 2044. Auckland Airport is also • a third daily Auckland to Singapore flight New Zealand’s second largest cargo port by from October 2018; and value, handling $12 billion of imports, $7 billion • new direct routes from Auckland to Chicago FY19: of exports and a total of 240,000 tonnes of and Auckland to Taipei. airfreight each year. These and a range of other flight changes across +2.8% We have an ambitious and collaborative our airline partners have resulted in 685,000 net approach to helping New Zealand sustainably additional seats per annum and an estimated increase in total unlock growth opportunities. 60,800 net tonnes of additional international passengers (21.1m cargo capacity in FY19. As well as the clear total passengers) Auckland Airport continues to support initiatives benefits to travellers, the development of new that contribute towards New Zealand’s wellbeing routes opens new markets for New Zealand through our direct initiatives with tourism and exporters and provides New Zealand customers +60,800 export industries and by supporting our wider with more important choices. tonnes of additional community to do the same. In FY19 Auckland international cargo Airport: Globally, passenger demand for travel has capacity slowed, including in some of our key visitor • funded research that has proposed a new source markets - Australia, China and Japan. industry framework called the Sustainable We are also seeing airlines adjust their business Tourism Growth Monitor; strategies to focus on profitability over capacity. 29 • supported the development of the international airlines Government’s tourism policy as well as Despite this, growth for the PSE3 period to a new industry strategy for the Tourism date has been broadly in line with the forecasts Industry Association - Tourism 2025 and at the time prices were set, albeit with higher 49 Beyond; than forecast domestic passengers and lower than forecast international passengers. In FY19 international • supported tourism product innovation we were impacted by the following capacity destinations through our partnership with Eat NZ; and changes: • participated in the development of a new tourism management strategy for Auckland - • Hong Kong Airlines and Air Asia discontinued 3% their New Zealand services; Destination AKL 2025. increase in We work actively with our airline customers and • Emirates discontinued their A380’s flying on International industry partners to develop routes to provide the Tasman; passengers customers with greater choice and to deliver • Virgin Australia added seasonal flights from more frequent and convenient flight schedules. Newcastle (Australia); and In FY19 we announced a number of new routes • Air New Zealand added new routes to Taipei 3.6% and new opportunities with our airline partners, and Chicago. increase in Domestic including: For further information refer to Section 16 of the passengers • a new direct route from Auckland to Seoul Annual Disclosure Commentaries. Auckland International Airport Limited 2 Conversion of 250,000m2 of land into new airfield area Planning, building and $333.2 million invested PSE3 period to date delivering a world class airport experience Our vision is a vibrant economic phase of a project using digital 3D • Northern Road Network hub which will create enduring value models of our airport assets. We Construction contract awarded for New Zealand for generations to are also using the technology to with on-going detailed design come. Our aeronautical programme create a complex model of future and consultation with airlines and is one of the largest and most construction projects at the airport other stakeholders . complex infrastructure programmes precinct to better manage workflow Less visible to the public have been in the country. planning, logistics and other aspects activities to create both operating of the construction process. In FY19 we completed the and construction headroom (often challenging transformation of the In terms of our anchor projects, in moving non-aeronautical activities) international terminal departures FY19 we made significant progress and to enable areas for construction area, awarded construction contracts in the delivery of our: works. for two anchor projects and Our roading network is also a advanced design on