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Airport To Call Up $12m Capital From Councils

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Fuseworks Media
Fuseworks Media
Airport To Call Up $12m Capital From Councils

19 March 2009 - Hamilton International Airport is to call up $12 million in unpaid capital from its five council shareholders. Announcing this today, chairman of Waikato Regional Airport Limited, Jerry Rickman, said the capital is to be paid in July . This is the first capital call-up since the Crowns share in the airport was sold to the shareholding councils in 1993 for around $3 million. Since then the councils have seen the net asset value of the airport, with its 266 hectares of land, increase to over $60 million.

Increased land holdings, runway extensions, car parking improvements, and a $15.5 million terminal development over the past 15 years have all been funded from operating profits, debt and some land sales. According to Mr Rickman, the capital will be used to retire debt which is currently at $16 million. Reducing debt levels is critical when we are facing a massive drop in revenue from the suspension of our international business when Air New Zealand withdraws transtasman services on April 25, he said.

The new capital will also allow the airport company to meet its upcoming obligations for the development of its new commercial and industrial estate, Titanium Park. The park covers 63 hectares and has just recently been rezoned from rural and aviation use to commercial and industrial. Titanium Park is about to go on the market in a joint venture with McConnell Property, part of the McConnell Group, New Zealands largest privately owned property, construction and infrastructure group. As 50 percent shareholder, the Hamilton City Council will be required to inject $6 million of capital.

The Waikato, Waipa and Matamata Piako District Councils share will be $1.875 million each. Smallest shareholder, the Otorohanga District Council, is to contribute $375,000. Directors of the airport company met last week to formally consider the implications of Air New Zealands decision to terminate international services. Taking into account the current economic environment and the financial impacts on the airport, the board moved to formally resolve to call up the unpaid capital. Copies of the resolution have now been delivered to the councils.

Mr Rickman said the shareholding councils had made a joint decision in September, 2004, to subscribe to unpaid capital to support airport development. A letter of comfort from the shareholders effectively guaranteed bank debt, allowing the airport to proceed with the terminal development. With Air New Zealand about to suspend transtasman services, this will have a major impact on the airports future financial sustainability, he said. Given our current debt levels, the loss of revenues from international operations has forced the board to rethink the airports long-term position.

Mr Rickman said the board had no choice but to ask the shareholding councils for capital. We have consistently kept the shareholders fully briefed regarding the risks under various airport scenarios, he said. Times are tough with the current economic situation but the aviation industry is a cyclical one, he said. This investment by the shareholders will allow the airport to continue with its long-term plans, he said.

Mr Rickman also signalled that the airport is continuing with the designation process to secure the ability to extend the runway in the future when required. The capital injection will ensure the airport is in a strong position to take up opportunities that will arise when the economy picks up, he said. The shareholders fully understand the serious outcome from Air New Zealands decision to terminate all transtasman flights from Hamilton.

Mr Rickman confirmed that the airport company is still in discussions with several low cost airlines. But it was unlikely that a replacement carrier would enter the market immediately after Air New Zealand exited transtasman operations, he said. Meanwhile, the company has announced its financial performance for the six months to December 30, 2008, reporting a $57,000 after tax operating surplus.

This compared to $4.39 million for the same period in the previous year which included property sales of $3.99 million. Total revenues were $3.5 million compared to $7.7 million, and expenses of $3.45 million against $3.09 million.

Mr Rickman told shareholders that international passengers had dropped 20 percent for the same period in the previous year. This was caused by a 43 percent decline in Australian passengers travelling to Hamilton and seen as a direct result of the low cost carrier, Freedom, being replaced with a full service Air New Zealand product. E

ight percent fewer regional passengers travelled on transtasman services, but with fewer flights available. On the domestic front, the airport reported a four percent decline in passenger numbers also with fewer flights.

Mr Rickman said this was the outcome from the recession as well as significant airline competition out of Auckland. The net value of the airport company, after liabilities, was reported at $60 million.

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