Auckland Airport takes stake in Queenstown Airport

Auckland Airport is spending $27.7 million to take a 24.99 percent stake in Queenstown Airport.

In a statement today, Auckland Airport said its purchase of new shares in the Queenstown facility would be funded from existing cash resources.

Queenstown Airport, following approval from Queenstown Lakes District Council, may exercise an option for Auckland Airport to increase its shareholding to 30 to 35 percent any time up to June 30, next year.

The statement said Queenstown was the fastest growing airport in this country. In the past five years international passenger volumes had quadrupled and domestic passenger volumes had increased 22 percent. In the 12 months ended June 2010, the airport had about 811,000 passenger movements, of which 704,000 were domestic and 107,000 international.

For the five years 2010 to 2015, Queenstown Airport had been projecting total passenger movements to increase by about 260,000.

Now, having formed a strategic alliance with Auckland Airport, it was expecting to achieve an additional 176,000 annual passenger movements on top of that -- boosting the five-year increase to 54 percent. About two-thirds of the incremental traffic resulting from the focused efforts of the alliance were expected to come from overseas, with the remainder being domestic travellers.

Based on average spend rates, those additional visitors would be worth more than $150m annually to the Queenstown economy, the statement said.

Queenstown Airport chairman Mark Taylor said the strategic alliance made sense as 70 percent of international tourists entered this country through Auckland Airport.

The new share capital would allow Queenstown Airport to fund growth of its operating capacity without increasing financial risk through borrowing more extensively, Mr Taylor said.

A stronger capital structure would also allow, for the first time, the company to pay regular dividends back to the community via the Queenstown Lakes District Council shareholding.

Queenstown Lakes District Mayor Clive Geddes said the partnership would ensure Queenstown Airport kept on a strong, sustainable growth path while ensuring control of the airport remained in local hands through the council's majority shareholding.

Auckland Airport chief executive Simon Moutter said the strategic alliance was consistent with his company's strategy to add to shareholder value by shifting some resources into areas that would drive earnings faster than the company's organic growth rate.

"Like many others in the tourism sector, we see the Queenstown Lakes District as one of the jewels in New Zealand tourism's crown. It is a highly attractive and complementary destination that strengthens our itinerary mix when marketing air services into New Zealand internationally."

Mr Moutter said Auckland Airport's growth strategy was similarly behind the move in January to invest in a minority stake in North Queensland Airports (NQA), the operator of Cairns and Mackay airports.

While Auckland Airport was open to other partnerships if it believed they would drive the growth of its business, it was not talking to any other airports, and would not be considering any equity positions in other airports until the benefits of those current investments had been proven.