Banks and council on board with bail-out to see Wellington Airport to recovery

Friday, 29 May 2020

Deal means Wellington Airport should now have access to enough funds to see it through to when travel picks up, majority owner Infratil says.

The terms of a bail-out of Wellington Airport have been agreed between NZX-listed infrastructure investor Infratil, Wellington City Council and banks, Infratil has announced.

Infratil chief executive Marko Bogoievski also signalled the possibility of changes to Vodafone NZ's relationship with Sky Television when announcing the company's annual results on Friday.

Wellington City Council, which owns 34 per cent of the city's airport, voted last month to approve a proposal to help underwrite the airport, but said it remained to be detailed and finalised.

Majority-owner Infratil said the agreement should ensure the airport had enough funds 'until traffic and revenues return to more viable levels'.

Wellington Airport chairman Tim Brown said the airport had already had about $85m of unused bank lines.

'What has subsequently been arranged is a $70m increase in bank lines and a $75.6m shareholder equity underwrite,' he said.

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Infratil boss Marko Bogoieski indicated the days of Vodafone's 'straight reseller arrangement' with Sky TV could be numbered.

Brown said the airport had to make 35 redundancies, not including hotel staff, as it cut costs by 26 per cent.

'A number of people are working part-time too,' he said.

After what had been shaping up to be a strong year, passenger numbers collapsed from 501,500 passengers in February to 4500 in April.

Infratil chief financial officer Phillipa Harford said its 'midpoint forecast' was that domestic traffic at the airport would return to 60 per cent of its pre-Covid level by March next year and that 20 per cent of international traffic would also have returned by then.

But she said the latter assumption was heavily dependent 'on how we go with our trans-Tasman bubble'.

Infratil chief executive Marko Bogoievski isn't issuing group financial guidance for the year ahead, but said the maintenance of its final dividend at 11 cents signalled confidence.

Prime Minister Jacinda Ardern cooled expectations of an imminent start to quarantine-free travel on Thursday by tentatively putting forward September as a possible start date.

The New Zealand director of the Australia New Zealand Leadership Forum, which is progressing work on the initiative, Fiona Copper, also distanced the organisation from a suggestion from its Australian co-chair Ann Sherry that a trial could be completed by July.

Brown said the airport was 'reasonably confident' of getting back to about 85 per cent of pre-Covid business by end the 2022 financial year.

'By March 2021 we are hopeful that at least the crisis period will be over for the airport, even if the recovery remains tough.'

Infratil says it is cautious about how Vodafone NZ will perform over the next six months, given the financial fall-out that Covid-19 will have on customers.

Harford said Wellington Airport had a 'different profile' from other airports.

Its short runway means it is less exposed to the international travel market.

But because of Covid-19, Wellington Airport is now one of the weaker links in the investment portfolio of Infratil, which is valued at $3.2b on the NZX and otherwise appears in a relatively strong position.

The company on Friday reported a 13 per cent increase in its underlying operating profit for the year to the end of March to $606m, and a bumper 'net surplus' of $509 million, compared to $64m in the prior year.

The result was boosted by its 65 per cent share of a $484m profit booked by Tilt Renewables from the sale of an Australian wind farm, and included eight months' contribution from Infratil's half-share of Vodafone NZ, which it bought last year.

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Infratil shares rose 2 per cent to $4.93 in morning trading in wake of the result and have now recovered almost all of their post-Covid dip.

Bogoievski said it had decided it would be prudent not to issue group earnings guidance for the year ahead.

But he said Infratil's decision to maintain a final dividend of 11 cents per share, payable in June, was a sign of confidence.

Bogoievski indicated in response to an analyst's question that the terms of Vodafone's partnership with Sky Television could be reviewed.

'The days of the straight reseller arrangement are possibly numbered,' he said.

Sky TV announced this month that it would enter the broadband market, which would put it into competition with Vodafone for the first time.

Bogoievski said its relationship with Sky was 'still warm' and noted and Sky had also signalled it might enter the mobile market, which it could do through a 'mobile virtual network operator' deal with Vodafone.

But he indicated the Vodafone relationship might not have been top of mind for Sky as it sought to refine its strategy.

The Covid crisis had shown how important resilient mobile and fixed-line broadband networks were, he said.

'We have done our part in delivering that critical infrastructure to New Zealand.'

But he said he was cautious about Vodafone's outlook for the next six months as no companies with large retail customer bases were 'immune from the current environment'.