Auckland International Airport Limited (AIA) provides airport facilities & supporting infrastructure in Auckland, New Zealand. It offers services that facilitate the movement of aircraft, passengers, and cargo, besides utility services, which support the airport; and leases space for facilities, such as terminals and cargo buildings and investment properties. It also provides services to the retailers within the terminals, car parking facilities for passengers, visitors and airport staff. Auckland International Airport’s FY23 underlying profit of NZD 148 million marked a return to profit but is still 46% below 2019. Passenger numbers nearly tripled from 2022, though the rebound slowed in the June half. Full-year international passengers were 67% of 2019 levels, and domestic passengers 84%. We expect passenger numbers to regain 2019 levels by 2025 and we think earnings can double in the next decade. The airport restarted dividends with a NZD 4.0 cent second-half payment, and we estimate NZD 13 cents in total for fiscal 2024, at the low end of the target 70%-90% payout ratio. We recently increase our fair value estimate by 10% to NZD 8.50 ($7.85 for the Australian listing) as we incorporate recent regulatory pricing decisions and capital expenditure underpinned by the decision.
Significantly higher charges arrive in FY24. Domestic passenger charges rise to NZD 5.05 from NZD 3.10, and international passenger charges increase to NZD 21.20, up from NZD 15.49. Further annual increases apply throughout the PSE4 regulatory pricing regime that ends in FY27. The new regime underpins a large capital expenditure program and the airport intends to deliver roughly NZD 7 billion of regulated investment over the next decade. Major expansions and expected fiscal-year completion dates include a transport hub, a terminal integration and an additional runway by 2029. Management says funding these projects might require an equity issue, which could be dilutive for current shareholders who don’t participate. We think that if an equity raising is triggered, it would likely be a sign of underlying strength in the business.