Hamilton Airport flying high
A four-star hotel refurbishment in the planning, extended parking, extra flights, a dividend paid for the second year in a row Hamilton Airport is on a roll.
It's a stark contrast to six years ago when international flights were pulled from the airport and passenger numbers stagnated. That was followed by Air NZ dropping its Hamilton-Auckland service in 2016, leaving direct flights only to Palmerston North, Wellington and Christchurch.
And yet, just over two years after the last Auckland flight, numbers are rising at a rate above the regional average over the past 12 months, and strategic buying and selling in wholly owned property arm Titanium Park is further boosting Waikato Regional Airport Ltd's profit. The year ending June 30 saw passenger growth of 11 percent, with a total of 352,614 passengers, after a rise the previous year of 5 percent.
A number of factors are driving the turnaround, including growth in the Waikato population, the state of the regional economy, tourism and boosted flight capacity.
Hamilton has seen Air New Zealand significantly lift capacity over the past two years, airport chief executive Mark Morgan says. The company's ditching of its Beech 19-seaters in favour of larger planes has also had an impact.
We have increased frequency and also larger aircraft, both adding up to more capacity on the route, he says. But of course, we want to see that continue. That's why we are pleased to see Air New Zealand putting in additional services this month.
Two flights a week, using 68-seat ATR aircraft, are being added to and from Wellington and four to and from Christchurch. The latter is a success story on its own for Hamilton Airport.
The Hamilton-Christchurch growth story has been quite remarkable, Mark says. We've seen very strong growth now for a couple of years, close to 20 percent each year.
Some of that may relate to business involvement in the Christchurch rebuild and other sector growth including government services and agribusiness, but tourism is also playing a part.
We're now seeing the evolving tourism story. It's still small numbers but if I go back a couple of years ago we would not have seen tourist groups necessarily flying out of Hamilton to Christchurch. We're now seeing that, particularly in the summer season.
He puts that down partly to Tourism NZ's strategy to drive regional tourism.
I think there's a good story here now with Hobbiton, with the Gardens, with Waitomo, and with a growing number of tourism businesses utilising the natural attributes of the region such as Raglan and the Waikato River and with a more useful [flight]schedule for tour groups to use Hamilton to move out of that three, or four-day North Island leg.
Mark and commercial growth and marketing manager Rebecca Corbett are also touting the opportunity of flying to Wellington to connect with international flights, rather than facing the uncertainty of the drive to Auckland Airport.
They are eyeing the completion of the Waikato expressway in 2020 as offering further growth, even drawing potential passengers from Auckland's own back pocket.
Arguably you'd be able to leave Pukekohe and be in Hamilton in 40, 45 minutes, Mark says.
I think what the expressway potentially does is create a certainty of travel time, so you'll be able to drive straight to Hamilton Airport on a motorway system basically popping out five minutes from the airport entry.
They see the expressway's proximity, along with the planned Southern Links and Peacocke development, as giving the airport a strong strategic position, close to the population bases of Te Awamutu and Cambridge, along with Hamilton, and with ready access to the Bay of Plenty.
Meanwhile, the airport has just boosted carpark capacity by 20 percent and is about to install new pay stations and exit-entry barrier equipment. Also in their sights is improved integration of the carpark with the terminal as part of a suite of changes which includes, most notably, the upgrading of the Airport Hotel, which they have recently bought. They have until January 2020 to take over the going concern from the current operator.
The intention with the new operator is to upgrade the property. Ideally we'd like to get it to a four star, Mark says. It's a significant investment that will cost many millions.
We obviously see a demand for that type of accommodation around this region, Rebecca says. There's a lot going on in the immediate airport precinct as well, with the growth at Mystery Creek.
And then there is the redevelopment of nearby Lochiel golf course to become an international standard 18 hole course, designed by Philip Tataurangi, and the likelihood of international golf tours coming the region.
The hotel has conference facilities that will augment the facilities recently opened on the first floor of the terminal, formerly used for international flights. The facilities, with six separate conference spaces, have been open about a year and have a full AV solution in all rooms and soundproofing. Rebecca says use has exceeded expectations. They have ensured the space could be converted back if there is a future aeronautical opportunity.
We really are a turnkey solution for an airline if they did want to bring additional services in here, says Rebecca. We've got the space and the infrastructure.
She is embarking on a three-month research project into future opportunities for airlines in their market, and is likely to include another look at the viability of a Hamilton-Auckland route
Once we've got that information we'll be in a better position, probably in the first quarter of 2019, to determine if we've got a strong business case to take forward to the airlines, Mark says.
When it comes to the shareholding councils, Hamilton, Waikato, Waipā, Matamata-Piako and ?torohanga, the proposition is looking very different from a few years ago as they receive a dividend of $250,000, their second in two years, and have signed off on a 10 year plan that envisages future growth and dividends.
Mark: I think from the shareholders' perspective, firstly their desire was not to provide any further capital that was five years ago when this board was appointed and that the airport company should be self-sustaining in terms of its operations, and I think that's what we've delivered.
Titanium Park hive of activity
Like Hamilton Airport, activity is ratcheting up at Waikato Regional Airport Ltd's wholly owned property subsidiary Titanium Park.
WRAL chief executive Mark Morgan says in the last 18 months something like 20 hectares has been sold in the industrial and commercial business park surrounding the airport, following a period of almost no activity.
That's been a massive escalation in activity, Mark says. We put that on the back of the growth in the region. You get some cornerstone tenants such as Visy and that gives the market confidence.
He also points to the relative scarcity and higher price of larger land lots in Te Rapa, as well as the park's strategic positioning set to be boosted by future roading projects including the Southern Links as well as the completion of the Waikato Expressway. Other buildings will appear in the next 12 months, with virtually all the land in Stage 3 of the Central Precinct sold and work going ahead on stage 4.
Meanwhile, the group has lodged a private plan change with Waipā to open up about 9 ha of commercial land in the southern precinct behind the Airport Hotel to the south, and Mark says about half of that is conditionally sold.
It's not all about selling: Waikato Regional Airport has also bought the Airport Hotel and a farm on the northwestern side of the aerodrome.
Mark says the latter creates two opportunities. It allows some future-proofing of the airport's aeronautical activities As an airport company we've got an obligation to look about 20 to 50 years, not two to five years, he says.
It also has land that's zoned industrial-commercial, opening up potential development over the next few years.
Those land sales have allowed us firstly to extend and develop within the precinct, to build the roading and infrastructure to open up more land, and to use the proceeds of the land sale for these other strategic acquisitions, he says.
We have about 330 ha of land and the Titanium Park land sale initiative contemplates about 25 ha of land sales. So a 10 year plan only contemplates the sale of about 10 to 12 percent of our land holdings and in fact during that time we may well purchase other strategic land as well.
We're looking as part of our property strategy to attract design-build and lease-back opportunities, so it's not only about the sale of land it's also about attracting property lease income to the group.
We say we're reluctant property developers with the intention of becoming property investors.