The share price for Auckland International Airport Limited [NZX:AIA] has jumped 5.41% in a bullish round of trading today.
Auckland Airport is the main gateway into New Zealand and acts as the country’s biggest transportation hub. Prior to the COVID-19 crisis, it used to serve over 20 million passengers annually. It has a strong presence on the New Zealand Stock Exchange, as well as the Australian Securities Exchange.
Auckland Airport’s share price is currently $5.94, and it has a market capitalisation of $8.06 billion.
Why has the [NZX:AIA] share price risen?
The COVID-19 lockdown has had a significant impact on the aviation industry, hitting Auckland Airport hard. International arrivals for the year have plunged by 95%. Revenue has been slashed dramatically. The company is only operating at 10% of its previous capacity.
This has encouraged Auckland Airport to commit to a radical turnaround plan to strengthen and reinvigorate its balance sheet.
Here are the key highlights:
- Auckland Airport has completed its $1.2 billion capital raise at $4.66 per share. This has attracted much interest from institutional and existing retail shareholders. It has likely been oversubscribed.
- There is now more certainty over the direction of company. CEO Adrian Littlewood has declared the business will shift its focus to a smaller, domestic-focused operation.
- In light of this, staff reductions are being carried out. A 20% pay cut has been enforced for existing staff. And large-scale capital projects such as a second runaway have been suspended.
This lean-and-mean approach is clear and decisive. It represents a possible rejuvenation of Auckland Airport’s financial position. This sentiment has sent an encouraging signal to the market, creating a measure of confidence. Watchful investors have responded favourably.
Where could [NZX:AIA] go from here?
Could redemption for the aviation industry be on the horizon?
As New Zealand emerges from Level 4 lockdown and transitions to Level 3, there are some hints now that green shoots are emerging.
Singapore-based think tank OAG has revealed that scheduled capacity for international travel has increased for the first time in 10 weeks. Some regions appear to be bouncing back — albeit in small percentage increases of 1% to 2%.
This is promising, but a full recovery is likely to be lengthy, given the global impact on tourism.
It could be a while yet before Auckland Airport experiences a major resumption of international air travel.
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