Auckland International Airport (AIA) case study

Case study: Auckland International Airport

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Auckland International Airport (AIA) is the gateway to New Zealand and New Zealand to the world. In the 2019 financial year AIA greeted 21.1 million passengers, almost 75% of all international arrivals to the country. AIA has many responsibilities to its customers, relating to providing places for businesses to operate, accommodation, retail, dining and travel.

Hundreds of business operate on the airport precinct each day with thousands of people either hosted in its buildings or passing through the doors. Pre COVID-19, AIA was undertaking a transformative $2bn capital expenditure programme, to meet forecast growth in passenger numbers. No one could have foreseen the disruption that COVID-19 brought to the travel, tourism, retail and hospitality industries, all of which are core activities at the airport.

Not an airport or airline in the world has been left unaffected by the impact of COVID-19 and the global lockdown but, for a nation of island dwellers, airports are, for the vast majority, the only way in or out. AIA plays a crucial role in connecting our country with the globe and we all have a vested interest in seeing this business survive and thrive.

Responding at speed

The sudden impact of COVID-19 (and the resulting travel restrictions imposed) had a significant and abrupt impact on AIA’s immediate cash flows. In the space of two months passenger numbers fell over 94% and considerable uncertainty existed over when any recovery in passenger numbers would occur. As a result, AIA needed to act quickly, firstly to stabilise the business and secondly to strengthen its balance sheet so to position the business for the eventual recovery in the travel industry.

More immediately, AIA was forecasting a period in which aeronautical, retail and transport revenues reduced to near zero. This significant drop in revenue meant it required assistance with cash flow management and negotiations with lenders as earnings based debt covenant breaches were possible should the adverse passenger environment continue for the foreseeable future. Additional capital was also sought to provide AIA with sufficient liquidity to see it through this period of considerable uncertainty.

A plan of action 

AIA management needed to stabilise the business and prepare for any follow-on capital raise. PwC was engaged to assist including:

  • working with management on the levers available to manage cash flows;
  • reviewing monthly cash flow run rate under various scenarios, including capital expenditure and debt repayment situations;
  • strategic advice in relation to AIA’s debt strategy, including advising on covenant waivers, maturity extensions, reviewing bank and USPP documentation and lender engagement;
  • assisting with management on their retail tenant discussions; and
  • providing advice on the quantum of equity capital that AIA should seek to raise and the method of that raise.
Looking to the future 

The work completed gave the Board and management confidence to execute New Zealand’s largest secondary capital raise and one of the most successful, pricing the $1.2 billion issue with one of the tightest discounts of any capital raise in Australasia undertaken in response to the COVID-19 outbreak. Since the raise, the AIA share price has appreciated 30.7% based on the issue price.

The speed at which AIA responded to its changing fortunes allowed the business to focus on its important role in responding to the COVID-19 outbreak, ensuring the safe repatriation of people, rather than be distracted on cash flow management and balance sheet matters.

In Alert Level 1, local travel is picking up, while international travel is still subdued. AIA’s extensive investment property portfolio has provided some financial cushioning, with the eventual return of international travel allowing AIA to return to full capacity. The capital raise has positioned AIA to respond to border relaxations when governments around the world allow it.



Carl Blanchard

Partner, Auckland, PwC New Zealand

+64 21 744 722


Ben Ford

Director, PwC New Zealand

+64 21 750 996


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