The company yesterday announced it had agreed to buy from Westpac Bank a 24.55% stake in North Queensland Airports, the operator of Cairns and Mackay Airports in Queensland, for $A132.8 million (about $NZ166 million).
The proposed deal, which is due to be settled tomorrow, was conditional on North Queensland Airports obtaining the consent of its financiers on the proposed transaction.
Auckland Airport chief executive Simon Moutter told the Otago Daily Times that since indicating in March last year the airport company would pursue expansion opportunities, it had looked at a range of options to drive synergies and volume for its core business at Auckland.
"We also recognise that our most important value driver is growth in international passenger volumes.
We believe that Asian tourism markets offer the greatest opportunity for volume grown and that one of the keys to growing Asian traffic is improved air services connections."
Driving more travel demand out of Asia would be crucial to the future growth of both Auckland Airport and the New Zealand tourism sector, he said.
New Zealand had underperformed against Australia in gaining a share of Asian tourism so the airport company had decided to take a position in the Australian market in an effort to get better connected and lift its market share.
While the primary focus remained direct Asian connections with Auckland, an important stepping-stone was to strengthen connections with other strategically located airports.
Asked how an airport company could influence the arrival of tourists, Mr Moutter said there was an element of judgement, as well as science, associated with running an airport.
There was a significant difference between companies joined in ownership and willing to work together compared to companies agreeing to work together in an ad hoc way.
"What I do every day is work with other airports in the region trying to attract airlines."
What usually happened was two airports presenting two business plans and the airlines having to negotiate with two different parties, he said.
New Zealand was a little country at the end of the route and it was hard work trying to convince chief executives of large airlines they should fly to this country.
Having ownership in North Queensland Airports would enable Cairns and Auckland to present a seamless proposition, making it much more attractive to fly the Asia-Cairns-Auckland-Cairns-Asia route.
That gave the airlines two pick-up and drop-off chances, Mr Moutter said.
There were 60,000 seats a year available between Cairns and Auckland compared with 1.3 million between Brisbane and Auckland, meaning the route was "ridiculously under-served and over-priced".
Cairns had 700,000 international visitors a year but only 10,000 of them flew on to Auckland.
"Those little stats mean there has to be opportunities there for us."
Cairns fitted the bill of a strategically located airport in terms of its location, scale, focus on Asian tourism and market diversification opportunities.
Mackay offered additional diversified exposure to the booming Australian resources sector, he said.
"This is very much a case of the right deal at the right time.
"We've monitored this situation closely over the last year, since privatisation by the Queensland Government, and now we've been able to take advantage of a rare opportunity to enter the Australian airport market."
Key partners in the airports were Infrastructure Investment Fund, advised by J. P. Morgan Asset Management, and The Infrastructure Fund, managed by Hastings Funds management, the largest airports funds manager in Australia, he said.
Auckland Airport would become the only airport operator in North Queensland Airports.
Its shareholding arrangements would enable it to exercise strategic and operational influence and drive benefits from joint air services development and operational expertise in sharing across all three airports.
Cairns had been underperforming due to the decline in some key markets, such as Japan.
However, Mr Moutter believed Cairns was poised for a strong rebound, driven by improving tourism demand, recently announced new air services, new federal government initiatives to encourage foreign airlines to fly to and beyond regional international airports such as Cairns, and more than $A45 million of government tourism support.
"We believe this is a good move for Auckland Airport and New Zealand and Auckland tourism."
At a glance
Cairns Airport is Australia's seventh busiest airport, with about 3.7 million passengers in the year to June 30, 2009 (compared with Auckland Airport's 13 million passengers in the same period).
It is the closest international airport to Asia on Australia's eastern seaboard and is the gateway to tropical North Queensland, an internationally renowned tourism region boasting two World Heritage listed attractions - the Great Barrier Reef and the Wet Tropics Rainforests.
Mackay Airport is an important regional domestic airport with nearly one million passengers in the year to June 30, 2009.
The airport is the main airport servicing the Bowen Basin, an important region for natural resources, which contains one of the largest deposits of coal in the world.
Mackay Airport also benefits from its close proximity to the Whitsunday resort islands.
