The $1.8b makeover
Inside Auckland’s new airport terminal
At Auckland Airport, there’s a lot of talk about “making your bed when you’re standing on it”. The airport is booming, with more than 10.5 million passengers passing through the international terminal a year, at the same time as the company is pushing on with an unprecedented building programme.
Balancing the build — which airlines have labelled as an overdue catch-up — with the need to keep tens of thousands of passengers a day moving, and keeping hundreds of construction staff safe, has also been likened to “playing draughts while doing open heart surgery”.
Airport company chief executive Adrian Littlewood says running an airport in the middle of the country’s biggest private construction site is a challenge.
“There’s no doubt we’ve been running hard to support the growth of the last few years.”
The company is spending $1.8 billion on improvements over the next five years and is close to completing the $300 million early phase of that — a completely remodelled departures area and an extension to Pier B which will double capacity in that part of the airport where the big double-decker A380s typically park.
There are new hard stands for aircraft to park at before they can use a gate, or to unload passengers into the growing fleet of buses used during the summer peak. Ten specialised flat-floor buses are on order for next year and self-powered enclosed stair units are being tested for use on the tarmac.
Busing to and from aircraft is becoming more frequent at Auckland — something it defends as a feature of many airports.
Within the five years there are 44 projects worth more than $1m apiece, plus the early part of a 30-year development to create the “airport of the future”. That will include a new domestic terminal joined to the expanded international terminal and
plans for a second runway to the north of the existing one.
This week the airport ran a behindthe-scenes tour of just-completed projects and work still in progress.
There are more Aviation Security counters, and they are curved and larger to process more passengers. After security screening, there’s a “recompose space” where passengers can pause, take a seat and reorganise possessions they may have taken out bags or their pockets.
The rounded benches and boulder-style seats are designed to be “functional but not too comfortable”, as the airport doesn’t want passengers lingering there too long.
Unlike the old security area, passengers don’t spill straight into duty free shops and throughout the area they can see the checks and counters ahead of them, which Littlewood says helps add to the area’s ambience.
Sparkling new bathrooms — in stark contrast to some others around the airport — were opened near the recompose space on Thursday.
The departure area and new pier feature sculptures by Weta Workshop, including kahawai in the ceiling and godwits that are about to be hung in place next week.
The terminal was constructed in 1976 according to the Ministry of Works manual — overbuilt, with some quirky design features and multiple levels on the same floor.
Some concrete features had to be cut up and taken out through a roof piece by piece.
Airport bosses say passengers must be prepared for changes from week to week. A prayer room next to the company’s recently opened premium Strata Lounge has been “bouncing about a bit” and will shifted when a spa treatment space is installed there.
Likewise, an outdoor spot for smokers may be on the move again.
Behind shiny white temporary panelling, there’s work being done around the clock, seven days a week. In what looks like the last-minute scramble in the final episode of a home renovation reality-TV show, hundreds of workers in the cavernous extension to the departures area have two weeks to get it done.
The new departure area will have twice the area of the existing one.
Shop fit-out is underway for a range of retailers, many new to Auckland Airport. The shops include Icebreaker, Koha (which stocks New Zealand arts and gifts), greenstone seller Mountain Jade, Merino Collection and Beecology (a premium honey store). Whittaker’s is also opening a “chocolate concept store”.
There will also be a bar overlooking the airfield and the Manukau Heads, among the 20 new food and beverage outlets. Fifteen are new to Auckland Airport.
By the middle of next year, the New Zealand “destination stores” will be joined by luxury brands including Coach, Hugo Boss, Furla, Fossil and Rolex.
Littlewood says this is part of the company’s aim of “showcasing the best of New Zealand and the world” as passengers depart the country.
New gates at the end of Pier B can handle one large widebody plane or two smaller ones, such as A320s, and are about 1.7km from the heart of the main terminal building.
The arrivals area will have to wait for its own major structural revamp, although Littlewood says new processes and technologies being introduced by border agencies are aimed at making the passage through the
airport smoother in the meantime.
“That’s a precursor to a more significant arrivals expansion that is on our schedule for the next couple of years,” Littlewood says.
A new domestic terminal to replace the existing 51-year-old building is not due until around 2022. He says there is cargo and fuel servicing to move and the domestic market is dynamic.
“We get a chance with the new domestic jet terminal that is flexible and has sufficient capacity for growth
in the long term.”
Airlines are watching the developments at Auckland closely.
The executive director of the Board of Airline Representatives, Justin Tighe-Umbers, says that while airline capacity growth is not running as hot as last summer, his members fear airport development will only just keep up.
“Will the airport capacity be enough to match the growth and unburden it to some degree? It could be a case of one step forward and one step back where the additional capacity gets eaten up immediately.”
Airlines want their customers to enjoy travel, and to get through the airport without significant disruption. “From the airlines’ perspective, we’re watching closely in that respect. The airport is working hard to play catch-up and Pier B is part of that.”
Airfield landing charges, based on the weight of aircraft, totalled $119.6m in the past financial year, up 15.7 per cent on the previous year. TigheUmbers says it is fine for the airport to be growing its retail business, where revenue is up 3.4 per cent to $162.8m, but it needs to be keeping to its core business.
“It can’t be at the expense of keeping up with their primary function of getting passengers to the aircraft.”
In the 12 years to June 2016, the company paid $2.052b to shareholders in the form of dividends and capital repayments, while its shortand long-term debt surged from $563m to $1.887b.
The company’s cashflow statement reveals that it made total investments of $1.562b over the same 12-year period, but $195m of that was used to purchase minority stakes in Queenstown Airport and airports in Northern Queensland. In addition, a significant proportion of the remaining $1.367b was invested in property assets that are unrelated to the areas in and around the domestic and international terminals.
Milford Asset Management executive director and Herald columnist Brian Gaynor wrote this year: “It is easy to argue from these figures that the Auckland Airport board placed a stronger emphasis on maximising short-term profitability, and making huge distributions to shareholders, instead of investing in infrastructure that would accommodate the massive increase in passenger numbers.”
The Commerce Commission is also watching the airport, as well as Wellington’s, in an upcoming price review. It will cover the airports’ proposed prices between July 2017 and June 2022, with a view to ensuring they aren’t earning excessive profits, and are providing services that reflect customer demands.
The regulator will start on Auckland Airport first, saying it’s of “greater interest to a wider variety of interested persons given it is our largest national airport and the scope of investment it is proposing”.
The commission will gauge the reasonableness of profits, and whether prices are set inefficiently.
Total profit after tax was up 26.9 per cent to $332.9m in the latest year, while underlying profit after tax was up 16.5 per cent to $247.8m.
For Auckland, the commission will investigate whether a lack of congestion charges sends unclear signals about the timing of the proposed second runway, which could be open towards the end of next decade.
Auckland Airport’s capital spending programme will also be reviewed, with the transport hub forecast to boost investment in aeronautical infrastructure by five times the usual amount.
“Auckland Airport has indicated it has experienced a material change in conditions over the past two years as growth has outstripped projections,” the commission’s process and issues paper says.
“It stated that a step change in investment is required in order to ensure that it is able to provide sufficient capacity and quality services now and in the future.”
Aviation commentator and editorin-chief of AirlineRatings.com, Geoffrey Thomas, says work has to be done to keep up with growth but it could be done more economically. “It appears that some airports in a monopolistic position don’t seem to be as focused on achieving the best valuefor-money option for the airlines.
“However, it certainly is more costly modifying and expanding existing infrastructure whilst keeping the airport running.”
Thomas says the relationship between airlines and airports would be far better if airports bore some of the pain during downturns.
Littlewood says the company has spent 80 per cent more on capital works than it had planned to five years ago, on infrastructure that needs to last for 50 years.
“What we’ve done is accelerate what we had on the plan as fast as we could reasonably do it,” he says.
“We’ve got to move with purpose but undue haste can leave you something that is poorly designed or inappropriate.”