Bankers pledge airport support

MELBOURNE Airport’s lenders have swung in behind the aviation hub, promising to give it critical breathing space after the coronavirus pandemic triggered a slump in earnings.

Accounts from the airport’s parent company reveal it expects to breach key conditions in contracts with its lenders – a development that, in normal circumstances, can trigger a collapse into receivership.

But those lenders have agreed to support the airport, waiving the contract terms in question in the short term as it rides out the pandemic.

The airport’s shareholders, including embattled wealth manager AMP and industry superannuation funds, have also missed out on hundreds of millions of dollars in dividends, the accounts show.

Melbourne Airport had previously announced that over the year to June, the number of travellers passing through the site had fallen more than 25 per cent to about 27 million.

From March to June, after restrictions were rolled out, passenger numbers tumbled 95 per cent compared with the same period a year earlier.

That predated the extra restrictions ushered in to quash the second wave in Victoria.

According to the accounts from the airport’s owner, Australia Pacific Airports Melbourne, it expects to breach covenants in loan contracts.

Typically, that can be a trigger for lenders to a business to call in receivers, but the airport’s lenders have agreed to waive those terms until June.

In a statement, Asia Pacific Airports chief financial officer Grant Devonport said the group expected to meet its obligations if conditions in the domestic market proved favourable.

“We forecast very early that COVID would disrupt our business due to the impact on global aviation, so we have been in continual discussions with our lenders and secured waivers from debt covenants up to and including June 2021,” Mr Devonport said.

As previously reported, the airport made a net profit of $101.6m the past financial year – down from $326.6m the previous year.

Airlines in recent weeks have hailed a surge in bookings for domestic flights.

Melbourne Airport’s parent company is a private business, owned by a group of major institutions.

The accounts, lodged with the Australian Securities and Investments Commission last month, lay bare the impact of the company’s difficulties on those shareholders.

On February 24, directors decided to pay an interim dividend totalling $100.8m.

But in March, as the pandemic developed, they reversed course, opting to instead conserve cash.