First profit for airport company

Press, 6 September 1989, Page 15

First profit for airport company

By

DAVE WILSON

The Christchurch International Airport Company has ended its first year with a net profit of just over $17,000. Next year it expects profits of more than $4 million. The airport company chairman, Mr Peter Leeming, and the chief executive, Mr George Bellew, described the first year result as a satisfactory foundation for significant potential improvement.

Mr Leeming said the final result had to be regarded in the context of expenditures not previously incurred in the administration of the airport.

A first-time payout to shareholders of almost $5 million represented a 28 per cent increase over the profit achieved in the preceding year of $3.9 million without any payment of interest to shareholders. Many non-recur-ring costs had also been incurred in the transition to corporatisation, he said.

The purchase of the rescue fire service operation and a raft of consultants’ fees were examples. In its first year, Christchurch International Airport, Ltd, generated revenue of $20.3 million and incurred expenses of $19.4 million to produce a net profit before tax of $965,000. Taxation of $947,000. re-

duced the final profit figure to $17,418. The airport company intends to take a case to the High Court to claim a higher rate of depreciation on its sealed runways. If successful, the taxation change would help boost profit.

Inland Revenue now allows only a 2 per cent per annum depreciation on the original cost of the runways, set at $23 million. Mr Bellew said Canadian tax laws allowed airports to claim for 7.5 per cent depreciation on runways. The Christchurch airport company would apply for a 10 per cent depreciation rate, he said.

Mr Bellew said the outlook for the airport company was strong. The financial result for the first quarter of the present financial year, to June, 1989, had achieved a pretax profit greater than the $965,000 pre-tax profit for the whole of last year. “Our final result for the year will depend to a large degree on the outcome of the application to the High Court on runway depreciation, but we are anticipating a profit next year substantially in excess of $1 million,” he said.

Mr Bellew said the company had a projected profit in mind, but declined to disclose details of the present budget. Mr Leeming said the

company accepted that its first year of business would produce only a modest result. “But we must improve on it very quickly and we are taking the view that just being better than the previous year’s result is not good enough.” In the company’s first year there had been substantial improvements of airport terminal amenities, he said. Mr Leeming said $l5 million of terminal extensions done in the last 15 months should accommodate passenger requirements in the forseeable future. Plans for a second international terminal building had accordingly been shelved, but not cancelled.

“We have been able to defer it by extending the life of the existing facility.”

Mr Bellew said the need for another terminal would be driven by market forces. It would be considered when passenger numbers warranted it. Another substantial development still in the discussion phase is the company’s planned International Antarctic Centre, intended to become the biggest scientific and tourist gateway to the Antarctic.

Mr Leeming said a decision to proceed with the centre could be made this month.