Diversification Wins Tops Award For Airport

Hamilton Airport has been lauded for a successful business strategy which has protected its staff and stakeholders from potentially devastating effects of Covid-19.

The Airport, owned by five Waikato councils, has won the Commercial and Non-aeronautical Initiative of the Year in the annual New Zealand Airport Awards. The awards acknowledge organisations and individuals who have achieved excellence within New Zealand’s airport industry.

Waikato Regional Airport Ltd (WRAL) chief executive Mark Morgan said the honour endorsed a diversification strategy which had its genesis in 2017.

“Five years ago, our Board and management team made the call to develop a strategic plan that, at its nucleus, aimed to protect our core aviation business by focusing on other things besides ‘just’ aviation,” Morgan said.

“It sounds incongruous. But that strategic plan and diversification strategy is what we measure our investments and decisions against. And frankly, given Covid-19 and its devastating impact on airports, that strategy saved us from a very poor financial result.”

WRAL’s diversification strategy has focused on:

• futureproofing aeronautical activity and requirements in perpetuity
• developing a land-holdings masterplan for aeronautical and non-aeronautical land boundaries.
• optimising the airport’s geographic location and realising industrial scale through property sales and leases
• implementing a 10-year rolling financial model and investment plan
• managing capital spend to maintain current and future capability
• using debt as an enabler
• encouraging aeronautical growth via route development and airline relationships
• supporting regional tourism marketing and development initiatives

“Our core purpose has not changed. At our heart, we want to operate a first-class, safe and compliant regional airport which is financially self-sustaining and which provides dividends to our shareholders – and we’ve largely done that,” Morgan said.

“But only because we own a diversified portfolio of business interests including property development and investment, hotel operation, tourism, a farming venture and airport retail and parking operations. We’re also a major landlord with more than 50 tenancies.”

If WRAL had been relying solely on aeronautical interests to get it through the last few years, the company would be in dire straits, he said.

“When Covid-19 arrived in March/April 2020 and essentially shut down airports, our existing property interests threw us a lifeline. In fact, April 2020 was a record month in terms of venue, thanks to income from our farm crop harvest and revenue from the Jet Park MIQ contract.”

“That meant that, despite Covid, we could maintain levels of customer service, keep our staff in jobs and continue to invest, even with no flights for two months. That’s quite extraordinary and is something I’m really, really proud of.”

Property sales worth $16 million over the three years have also made a massive contribution, he said. Proceeds from land development allowed a 30 per cent reduction in debt levels during the first year of the pandemic. This opened up opportunities to generate a diverse income and earnings base through continued investment during the last two years.

Morgan said an “opportunistic” decision to repurpose the Jet Park Hamilton Airport Hotel as a managed isolation facility was a “huge windfall which kept the coffers full”. After two years out of action to paying guests, the refurbished Jet Park Hotel reopened last month to strong bookings.

“That decision to operate as an MIQ facility gave us an income pipeline. And along with land sales, that gave us the confidence to continue to invest in our core aeronautical business in a way we would have been otherwise unable to afford,” he said.

“Covid-19 was hugely challenging and its impacts will be felt for a while yet. But in many ways the pandemic gave us impetus to turbo-charge our diversification strategy. In doing so, we’ve protected our core business and have ended up in a much stronger, more secure financial position.”

“While some of the larger, international airports have a similar approach, we are the only regional airport to have progressed this far. In that respect we’re unique and it is really, really pleasing to see our success recognised nationally by our industry peers.”

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