Airport staff options blow out sky high

A report in NZ’s The Dominion Post says that Auckland International Airport’s soaring share price has caused a $10 million cost blow-out to its executive share option plan.

The airport posted an after-tax profit of $92 million for the year to June 30, 10.8 per cent down on the year before.  Most of the drop was because of a $9.9 million non-cash provision for incentive plans for 20 senior staff, dating from 2003.

Auckland airport chief executive Don Huse said the provision was based on the airport’s June 30 share price of $3.28 and last year the provision was only $475,000.

“The significant increase in our share price from June meant that the underlying value of those incentive plans looking out for some years escalated in value,” he said.

Excluding the incentive plan costs, the airport’s after-tax profit was still about $1.2 million less than last year’s result.

Mr Huse said the result should be interpreted in the context of the airport nearing the end of its $500 million five-year capital expenditure programme.

The result had been impacted by depreciation and costs associated with increased debt and higher interest rates, he said.

“Flatlining surplus after tax is a very solid result when you look at the capex programme we’ve had.”

The airport had revenues of $322 million, 5.3 per cent up on the year before.

Earnings before interest, taxation, depreciation and amortisation (ebitda) were $243 million, 1.1 per cent more than in the June 2006 year.

The market was unsurprised by the result, which was flagged last month, with the airport’s share price closing down 3 cents on $3.17.

Goldman Sachs JB Were analyst Marcus Curley said it was a reasonable result, in line with expectations.

He said he was projecting ebitda growth of 8 per cent this year, slightly ahead of the airport’s 7 per cent prediction.

“That excludes the impact of Pacific Blue so there might be some modest upside from that although they’re coming in half way through the year,” Mr Curley said.

Passenger numbers were up by 2.6 per cent during the year, below the airport’s long-term average of 5 per cent a year.

After a slow first half, passenger growth accelerated to 3.8 per cent in the second half, a trend that was continuing into the current year, Mr Huse said.

It was driven by more New Zealanders travelling overseas because of the strong dollar and a big increase in visitors from China, he said.

“Passenger growth is returning to the long term trend.”

Pacific Blue would also have a positive impact, Mr Huse said.

The first stage of the $85 million project to expand the international arrivals section was to open in April while the new A380-capable Pier B should be finished by September.

Next year would bring to an end a major investment cycle.

“The additional capacity in place will enable us to support significantly increased volumes. I would anticipate that capacity would not become unduly congested for seven to eight years.”

Report by The Mole