Coronavirus: Land sales to prop up Hamilton Airport during Covid-19 downturn

Monday, 27 April 2020

Hamilton Airport terminal is closed, operating only for emergency and medical services. Its rescue and fire team remain on site.

Hamilton Airport was on target for landing a record financial performance before Covid-19 grounded its operation.

Airport chief executive Mark Morgan said it had forced the suspension of its $15 million terminal upgrade and a '97-98 per cent' loss of income from its aeronautical arm, which included flight services and an aviation school.

The airport hotel was also affected but had been booked by the Ministry of Health as an isolation facility to back-up Auckland hotels.

It hadn't been needed but had generated some income for the airport from the ministry.

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Morgan said that funding would end soon and after that the hotel would need a recovery plan.

He outlined the airport's position to one of its shareholders, Waipā District Council, at the council's finance and corporate meeting recently.

He told the committee airport staff were working from home but those from the cafe and store were unable to work, and were receiving the government's wage subsidy.

The airport terminal was closed, operating only for emergency and medical services. Its rescue and fire team remained on site.

Morgan said the airport's property sales would be its 'lifeline' over the coming year.

Money generated meant the airport would not have to borrow from its shareholder councils.

The airport had an unconditional sale agreement that would pump 'about $2.5m of free cash flow' into the airport's pocket.

'So the reality is that we can get through this year and through to June 2021, in a slightly positive cash position,' Morgan said.

'We also have some work in our central precinct (industrial development) and again we have the ability to settle some conditional land sales, to feed additional cash into the group.'

The committee heard there was about $7.6m worth of pre-Covid-19 planned land sales coming up.

The land was not needed for aeronautical purposes or airport operations.

Hamilton Airport Chief Executive Mark Morgan says careful planning will ensure the airport recovers from the Covid-19 alert.

The airport had submitted two 'shovel-ready' projects for government funding, including the $15m terminal upgrade and an $11m transportation and infrastructure project, which involved roading and wastewater.

'Under the terminal redevelopment we are ready to go, tenders had been received and were being evaluated the week of lockdown.'

Morgan said cost reductions had been made, including the payroll. The board had agreed to a reduction in director fees, for example.

Hamilton Airport expects there to be no Air New Zealand domestic flights operating before October 2020.

The focus now was on a plan for the next 12 months.

It was noted the airport hotel would need special attention to survive.

'The hotel was not reliant on international tourism but it was reliant on conferencing,' Morgan said.

'We are yet to understand the behaviour of the business community as we go forward into this new world.'

Close to $4 million was spent on the hotel prior to lockdown.

Morgan said it was assumed there would be no Air New Zealand flight services before October this year.

'And then we would only recover about 40 per cent of passengers through 2021 calendar year and well into 2022 before we have a positive ebitda (earnings).'

The airport's finance manager Scott Kendall said the next 15 to 18 months would be 'a bit painful' financially.

'But after that we will be back on our feet and not heavily reliant on land sales.

'Out of all this we are preserving core capability, not compromising any aeronautical capability.'