Auckland International Airport Limited (AIA) Earnings Call Transcript & Summary

[Foreign Language] Good morning, and welcome, everyone to Auckland Airport's Annual Meeting. Thank you for making the effort to join us today via video link, and I am sorry, we can't meet in person. With the uncertainty around COVID levels, we decided holding a virtual annual meeting was the most practical way of ensuring everyone, who wanted to, could attend the meeting safely. I'm Patrick Strange, and I'm Auckland Airport's Chair. Here with me today is our Chief Executive, Adrian Littlewood, who will speak shortly; and director, Julia Hoare, on my left, who will address you briefly on her reelection. My fellow directors are also joining via video link: Mark Binns, Dean Hamilton, Liz Savage from Australia, Justine Smyth, Tania Simpson and Christine Spring. Our Chief Financial Officer, Phil Neutze, is also with us by video. And finally, we also have our General Counsel, Mary-Liz Tuck, here with us today; some other executives; and our auditors, Deloitte. We have a quorum of shareholders, so I declare the meeting open. First, a few house rules for the day. Shareholders participating in the meeting online will have the ability to ask questions and vote through the virtual meeting platform. If you encounter any issues, please refer to the virtual annual meeting online portal guide or you can phone the helpline on 0800 200 220. [Operator Instructions] All of the resolutions put to shareholders today will be decided by way of a poll. Shareholders will be able to cast their vote using the electronic voting card received when online registration is validated. Again, please refer to the virtual meeting online portal guide or use the helpline specified. The polls will be administered by our share registry, and Deloitte will act as Scrutineers, and the results of the polls will be announced in the usual way via the stock exchanges after the close of the meeting. The notice of meeting was sent to holders on the 28th of September, 2020, and to the auditors of the company, and it was also posted on our website. The financial statements for the year ending 30th of June 2020, and the audit report are included in the annual report, which is available online. Representatives of Deloitte are here and are available to answer any questions that might relate to audit matters. Following my address, Adrian will provide a review of the year, after which we will consider the motions and then receive any questions. Well, we began the 2020 financial year in a strong position, does seem a long time ago, achieving solid passenger volumes in the first 2 financial quarters. And our major infrastructure redevelopment program was underway and on track with 4 big key projects entering the execution phase. Then the pandemic arrived. The emergence of COVID-19 is the biggest challenge we have faced in our 54-year history, significantly impacting our organization, obviously, the aviation and tourism sectors and the wider economy. At the outset of the pandemic, we knew it was really important to respond swiftly, not only to safeguard the organization's future, but also to protect the safety and wellbeing of our people, travelers and the thousands who work here in the airport environment. Knowing our business is resilient and its long-term fundamentals remain very strong, we set about immediately to chart a response that would position Auckland Airport to recover and emerge from the crisis in a sound and strong position. We moved quickly to reduce both operating and capital costs and to preserve cash. This included reducing the size of our workforce, lowering the hours and salaries of most nonfrontline staff, including executive, to 80% for 5 months. So I will say the executive certainly didn't go to reducing time, theirs grew. And we also reduced directors' rem by 20% for that 5 months, and we pretty much immediately suspended and/or canceled all but very critical capital projects. We carried out a successful equity raise of $1.2 billion in April, together with a major restructure of our near-term bank debt to protect our balance sheet. We also secured 2-year covenant waivers with our banks and our USPP lenders, and we are very grateful to you, our shareholders, for your show of confidence and support. You understand as we do that Auckland Airport has a key role to play in New Zealand's economic recovery. We are a trading nation, vitally dependent on physical access to world markets. And once conditions allow for tourism to recover, our country remains an extremely attractive place for high-value tourists to visit. However, before we update you on our investment and development plans looking forward, a summary of the key aspects of our performance for 2020 financial year. It will come to no surprise to anyone that our results were in line with the severe downturn in global aviation. Virtually, overnight, we went from 30,000 travelers per day at our international terminal to, perhaps, a few hundred, and we had some days where there were none. So in the year to 30th of June 2020, revenue was down 24% to $567 million with earnings before interest expense, taxation, depreciation, fair value adjustments and investments in associates decreasing 53% to just over $260 million. Reported profit after tax was down 63% to $194 million, and underlying net profit was down 31% to $188.5 million. Underlying earnings per share correspondingly down nearly 35% to $0.147 for the 2020 financial year. The total numbers of travelers passing through Auckland Airport declined to 15.5 million, down over 26% on the previous year, and that's the first decline in passenger numbers since the GFC, just a little over a decade ago. In contrast, property has performed very strongly, even since the outbreak of COVID-19, and as a result, annual rent roll has increased 4% to $104 million and the portfolio value has risen 17% to $2 billion. Unfortunately, as you know, to manage cash flow, we are not in a position to pay dividends to shareholders for the 2020 financial year, and that's the first time the Auckland Airport has not paid a dividend since we were first listed on the NZX 22 years ago. Looking ahead to the 2021 financial year, aviation continues to face challenging times, which naturally brings a high level of uncertainty to the timing of our recovery. Our financial performance is strongly linked to international arrivals and departures. And while there is, in our mind, absolutely no doubt that international travel will recover, it is not clear how quickly or when. It's that degree of uncertainty that prompted us to suspend underlying earnings guidance for 2021, and we'll reassess that at our interim results in February. Now while both IATA and Standard & Poor's have forecast a full recovery of international travel in approximately 3 years, at this stage, your Board thinks it prudent to take a more conservative approach. We believe a full recovery could well take longer than 3 years, but we are hopeful, even confident that domestic travel will return to normal within about 2 years. And we do believe that we will see quarantine-free travel both ways across at least to Tasman and to Pacific Islands earlier. We believe one of the keys, this is the development of a greatly enhanced risk and technology-based border system, and we are doing our part and indeed, leading that effort. In terms of construction work on site, the start of the 2020 financial year could not have been more different to how it looks now. We began with more than 200 interconnected projects either planned or underway to build an airport for the future. These included major transport developments, terminal upgrades and airfield works, projects we're pretty proud to be delivering for New Zealand. But in March, construction came to a standstill as New Zealand entered Level 4, and we made the difficult decision to immediately cancel or defer more than $2 billion of infrastructure projects. Only projects essential for safety or resilience were untouched. Since then, we've been conducting an in-depth review of our development priorities. We remain confident and committed to our long-term infrastructure plan, but the timing of parts of it are clearly uncertain. In the near term, we will continue to prioritize projects based on safety, asset replacement, maintenance and resiliency. We are, though, very conscious that domestic volumes will return more quickly and may challenge the capacity of our domestic terminal. We'll continue to assess our planned projects against future market conditions and our ability to support the investment required to complete them, and Adrian will talk more about this shortly. In the 2021 financial year, capital investment will be focused on existing roading projects, delivering core airfield renewals such as the slab replacement on the runway and apron works along with upgrades to the baggage system. As I mentioned earlier, our property business remains strong, and we are continuing to be approached with inquiries for new, very high-quality property developments. And solid growth here can play a part in the organization's wider recovery. Capital expenditure for the 2021 financial year is still expected to be between $250 million and $300 million. In terms of governance, our Board continues to evolve. At our 2019 Annual Meeting, we were joined by Liz Savage, who has 20 years experience in senior airport leadership roles in Australia and Europe. Liz has proven already to be a very valuable addition, even if it's at the end of a Zoom link for the last 6 months and some very early starts for someone in Australia. My apologies, Liz. We're also very pleased to have Julia Hoare standing for reelection as an independent director after 3 years in line with the NZX listing rules. Julia is Chair of our Audit Committee and a very valuable contributor. The Board unanimously support her reelection. Finally, I want to thank my fellow directors for their very hard work over the year, but I particularly want to highlight and acknowledge the unfailing commitment of the Auckland Airport team, everybody from the frontline staff to those in the executive team. It's been a pretty tough year. We've seen projects put on hold and very major job losses impacting us, but also our commercial partners and the contractors who support us around the airport. In the midst of this, the teams had to support international repatriation and freight operations 24 hours a day under difficult conditions, and they've done it superbly. So again, on behalf of the Board and our shareholders, thank you to all those people. While the path is uncertain, looking forward, we remain very confident about our future and are well placed for recovery when that happens. Ultimately, we know we will return to adding value for our investors and growing New Zealand's success in travel, trade and tourism. And finally, thank you, once again to you, our investors, for the strong support you've shown us through these uncertain times. It is very much appreciated. I'll now hand over to Adrian.

Thank you, Patrick. More than a good morning, everyone. As Patrick noted, Auckland Airport has never faced a year like this one. Patrick spoke about some of the broader issues and how we handled those challenges, and I'd like to share just a bit more detail on what the team at Auckland Airport did to respond to the arrival of this pandemic, and how we're charting our course of recovery. Firstly, I wanted to echo Patrick's comments, and I just wanted to say how proud I am of our team at Auckland Airport. Through demanding and uncertain times, particularly during the early days of the crisis, our people were on hand to ensure travelers could get to where they needed to be. Air links remained open for crucial exports, and the airfield continued to run in a safe and reliable manner. And everywhere I go throughout our business, I'm proud to be surrounded by committed people who have ensured that Auckland Airport gets its vital job done, and it's thanks to those people that our day-to-day operation runs smoothly and the company is in the best position to make a strong, long-term recovery. Also, I would like to acknowledge the 260 people who have left our organization, representing about 37% of our workforce, a significant number. As international passengers' numbers fell and our infrastructure development program was scaled back, we had to make the very difficult decision to reduce the size of our organization. And the staff who we've taken a great deal of time to build up were valued members of our team, and we're really sorry to see them go. When the pandemic first hit, we put into action a 3-tier plan around respond, recover and accelerate. In the first phase, Auckland Airport took immediate steps to take care of the health and safety of travelers, our people and the community. And through the pandemic, we have worked side-by-side with public health officials to make sure border protocols were being followed to help protect our country from the spread of the virus. And we stepped up our sanitization measures across our terminals. During those hectic first months, and they were incredibly hectic, our people played a vital role in facilitating repatriation services, often helping airlines that had no recent history in New Zealand to get tens of thousands of people home at very short notice. We also had to be mindful of the company's financial health. As Patrick mentioned, we moved quickly to address those financial challenges. We took steps to strengthen our balance sheet securing significant support from our lenders, including extending the maturity dates of our bank loans and agreeing covenant waivers with our banks and USPP investors. And we went to shareholders in April for the equity raise of $1.2 billion. And I would note that was all done from home under Level 4. And I join Patrick in thanking all of our investors for your support and net equity raise. We also implemented a range of measures to manage cash flow, including the tough call to cancel or defer a majority of our infrastructure development program. However, the drop-off in air travel did create some opportunities for us. It meant we were able to bring forward the planned replacement works for pavement at the eastern end of our runway, completing this important airfield maintenance with minimal disruption to airlines and the traveling public. We're also pushing on to deliver key transport infrastructure, and anyone who's driven into the airport from a long -- from the north along George Bolt Memorial Drive will have seen the team hard at work. This road is a vital connection linking the airport to the city, and by completing these works now, with less traffic on the roads, we'll be better positioned for growth as the recovery continues. Equally, our joint project with NZTA Waka Kotahi on adding mass transit lanes to State Highway 20B means that now both from the northern and southern entrances to the airport precinct, we will shortly benefit from very significant transport upgrades. So we're now into the early stages of our recovery and working hard to build and maintain public confidence in air travel, rebuilding our domestic business and playing our part in efforts to reestablish regular, reliable air links with Australia and Pacific Islands. It's been great to see domestic travel returning strongly with Auckland's recent shift back to Level 1 with passenger numbers in the October school holidays reaching about 65% of the same period last year. The encouraging increase in domestic travel has allowed us to reopen all of our domestic parking products, including Valet as recently as Monday with strong customer demand following on. As a result, our Auckland Airport's financial performance in the first quarter of the 2020 financial year has been somewhat stronger than we anticipated when we undertook the equity raise. While the shape of the recovery has, and will continue to be, uncertain, operating earnings or EBITDAFI in our words, average across the months of July to September, have been approximately $10 million per month versus the small monthly losses we allowed for when we sized the equity raise in April. Since the earlier stage of the pandemic, Auckland Airport has played a leading role in developing comprehensive plans to support the government decision-making about when and how to reopen the border to other low-risk countries. Earlier this year, we helped bring together and support a team of 40 experts and different organizations in the development of a blueprint for trans-Tasman safe zone, and this was shared with the Australian and New Zealand Prime Ministers. The reopening of the state -- Australian states of New South Wales, South Australia and Northern territory as of last week to quarantine-free travel for New Zealanders is a step in the right direction. It's a small step, but we continue to see new examples around the world of countries working hard to establish new processes and protection to allow borders to safely reopen. We do believe the government and the private sector need to work together with some urgency in order to chart a path for New Zealand in a post-pandemic world in a way that keeps our community safe, but also allows families to reconnect and jobs, tourism and our economy to gradually recover. We think New Zealand needs to develop a truly capable health -- domestic health security system that will allow us to live with the ongoing risk of COVID-19, while ensuring our country can stay safe and connected to the world. We will continue to work alongside and support New Zealand government as it considers future arrangements for quarantine-free travel across the Tasman and to other low-risk countries as conditions permit. To enable safe travel zones, Auckland Airport has developed a comprehensive plan to ensure that we can provide a safe and separated pathway through the international terminal whenever the government decides that it's safe to do so to allow quarantine-free arrivals. We've worked hard with our border agency and airline partners, and the physical works are now complete to allow for the separation of different categories of travelers under a range of different scenarios. As we look to the future, Auckland Airport will continue to build on the earlier work to maintain and bolster air links and drive inbound tourism. Prior to the arrival of COVID-19, Auckland Airport was connected to 43 international destinations and was served by 29 different airlines. Our team worked incredibly hard to develop those links over many years, and we are confident that as economies and airlines return to strength, those vital air links will be restored. New Zealand continues to be an attractive destination, and I actually think in a post-pandemic world, this will be enhanced. As previously mentioned, the outbreak of COVID-19 and the reduction in flight and passenger numbers meant we had to do the hard work to reevaluate our entire infrastructure program. Our aim was to act swiftly, but prudently, to avoid unnecessary spending while preserving what we had already achieved. Major developments, including the 4 key anchor infrastructure projects were well underway, as Patrick mentioned. A 250,000 square meter expansion of our airfield, taxiways and remote stands; preparation work for 2 key terminal expansion projects, including the $1 billion-plus domestic jet hub and a new $350 million-plus international arrivals area; almost $100 million upgrade to our core roading network; construction of Park & Ride facility are some of those projects. We also had secured environment court approval for design changes to the second runway that we'd anticipated, including extending the planned length. Until we have more certainty about the outlook for aviation, the decision was made to defer many of these projects. These include terminal projects such as the expanded international arrivals areas, airfields, extension of taxiways Mike and Lima, transport projects and the like. We know that our people and partners were excited to be part of these key projects, so deferral decisions were certainly not taken lightly. However, we will preserve and build on our earlier project work, and we will reserve the timing of project restarts as demand triggers are met. We're also very mindful that while we must carefully monitor our balance sheet, we also have a window of opportunity for development while the airport is quieter, and we are actively considering opportunities in this regard, including the shape of our future investment in new domestic capacity. There's no question that COVID-19 has changed many aspects of our business, but our commitment to be a good neighbor and a good employer still remains the same. Because COVID-19 has placed such unprecedented challenges upon our people, we've made sure that lines of communication with staff have been solid throughout the pandemic, keeping our people connected with the organization and with each other. We've worked with our contractors to push for better health and safety outcomes, despite the changes, and our commitment to zero harm has meant that we've continually looked for improvement in our processes and performance. And the results of this work was clear in the past year with an 89% increase in the number of safety observations and hazards reported and our safety systems, 72% decline in employee injury and a 6% decrease in passenger incident rates in the last financial year. More widely through the airport -- Auckland Airport Community Trust, we issued another $350,000 amongst community projects, supporting learning, literacy and life skills in South Auckland. During the year, Auckland Airport Jobs and Skills Hub, Ara, continued to connect local people with training and employment opportunities as part of joint initiatives with government agencies, training providers and employers. Despite the significant challenges our organization is currently facing, Auckland Airport's long-term commitment to Ara remains. However, we have changed the model to partner more closely with the Ministry of Social Development and the Auckland Business Chamber. We will continue to support Ara with development opportunities and by providing facilities for its headquarters. In the 2020 financial year, we also made good progress on achieving our sustainability targets, but the outbreak of COVID-19 has prompted a review of our approach to sustainability. We're looking forward to providing an update on our new strategy and approach when we release our interim results in the 2020 financial year. So looking back to 2014, Auckland Airport created a new master plan, a significant change for us. It was a vision for the future with an ambitious program of infrastructure, development at the center of it. Following our formal infrastructure consultation and aeronautical pricing process in 2017, building off that 2014 plan, we confirmed the development path, and much of this program was coming to life. When COVID-19 hit, we were on the approach to a new Domestic Jet Hub, a second runway and a range of transport projects amongst many others. COVID-19 might have changed the outlook, and it has certainly reset the time lines for tourism growth, but our commitment to our master plan and the vision for the airport remains. Auckland Airport will continue to be the airport to serve New Zealand's future needs. I want to close by thanking our people, again, at Auckland Airport, our partners in the aviation sector, for doing such a remarkable job in uniquely testing circumstances. I also wanted to thank our valued customers and our Board for its guidance under these unusual times. And finally, thank you to you, our investors, for your ongoing support. [Foreign Language] Thank you.

Thanks, Adrian. Now to the resolutions. Voting on all resolutions will be conducted by way of poll. You may ask questions on each matter being put to the shareholders through the virtual meeting website. As I mentioned, shareholders will be able to cast their vote using the electronic voting card received when online registration is validated. To vote, you'll need to click Get Voting Card within the online meeting platform. You'll be asked to enter your shareholder or proxy number to validate, and please then mark your voting card in the way you wish to vote by clicking For, Against or Abstain on the voting card. Once you've done that, please click submit vote on the bottom of the card to lodge your vote. As I mentioned earlier, please refer to the virtual meeting online portal guide or use the helpline 0800 200 220, if you require assistance. As shown on the presentation, we've received proxies from 1,095 shareholders, representing a bit over 1 billion shares. Shareholders, the company's constitution allows for a maximum of 8 directors. And as I mentioned earlier, we have Julia Hoare retiring by rotation and offering herself for reelection. Julia was appointed a director at 2017 Annual Meeting and accounted with extensive governance experience. Her background and knowledge are serving Auckland Airport extremely well. And the Board unanimously recommends that shareholders vote in favor of Julia's reelection, and she is considered by the Board to be an Independent non-executive director. Julia?

Thanks. Thanks, Patrick, and good morning, everyone. It's my pleasure to be addressing you today, and it's been a privilege to serve you over the last 3 years. Through this time, I've done my absolute utmost to give the airport and you my very best. I can define my 3 years with Auckland Airport into 3 very distinct and very different periods. During my first couple of years, we were continuing to experience very strong growth, as being talked about today, across the entire business. We worked toward delivering on a historic transformation to modernize and expand the airport to become an airport for the future, one that would meet all of our stakeholders' objectives, be they the airlines; the traveling public; our retailers; our staff; and you, our shareholders. At the start of my second year, I took over as Chair of, what we call, the Audit and Financial Risk Committee, or the AFRC, and I was also a member of the Infrastructure Development Committee, or IDC, which was driving the extensive capital development program. Both committees worked incredibly hard in tandem with the aim of delivering the transformative vision we've talked about today. But the arrival of COVID-19 across our borders, earlier this year, marked the start on my second defining period on the Board. The AFRC shifted its focus to shoring up our operating framework and our balance sheet, culminating in our successful $1.2 billion capital raise in April, May this year, which provides our company with the financial flexibility to see through this extraordinary and unforeseen period. Leading up to this, the IDC had to also dramatically reprioritize our enormous infrastructure program to fit the new environment that we're in today. And it was a period of both intensive input by me and all of my and your directors and our incredibly capable management team, who I have to say, worked tirelessly running endless scenarios as we all try to envisage what the next few years might look like, and I really want to take the opportunity to thank them at this point. I'd also like to thank you, as investors, for the support that you actually showed us during this time. We've talked about it already, but it was especially evident by the way that you supported the capital raise, and it's really pleasing to see that the market has retained confidence in our sound fundamentals. This leads me to my third period, the reshaping, redefining and rebuilding of our airport for the future. Given the COVID-19 uncertainty that still lies ahead of us, we're working really hard to couple sound operating and financial disciplines with sensible capital investment decisions, so we end up with a future-proof airport that we're all proud of as the gateway to New Zealand. Today, I'm seeking your support to continue working on your behalf as we focus on this third phase I've talked about, the rebuild process, to deliver our airport for the future. So thank you. Thank you.

Thank you, Julia. I move that Julia Hoare be reelected a director of the company. Are there any questions online? We'll just pause for a few seconds to see if any are coming through.

There are no questions from shareholders online at this time.

Thank you. There being no further questions. I'd now ask you to select For, Against or Abstain for the Resolution 1 on your voting card. Thank you. [Voting]

Deloitte, our auditor, is automatically reappointed this year as an auditor for the company under Section 207T of the Companies Act 1993. I move that the directors be authorized to fix the fees and expenses of the auditor. Again, just take a minute to see if there are any questions online.

There are no questions from shareholders online.

Thank you. Please now select either For, Against or Abstain on Resolution 2 of the voting card. Just take a second while you do that. [Voting]

Okay. Let's get to the question part of the meeting. So I now invite you to submit your questions, if you haven't already, whether they are either to the presentation, to the annual report, the financial statements or any other topics concerning the governance or management of the company. Now you can continue to submit your questions online, and we'll be also addressing first, the pre-submitted questions. If we do not manage to answer your question for any reason, we'll try and get in touch with you and respond after the meeting anyway. Okay. We've got a member of our legal team, [ Kes ], who will read out the questions as they come in, and I'll delegate somebody to answer them. [ Kes ]?

The COVID pandemic has obviously had a significant impact on your operations. However, the reduction in flights has also had a hugely positive effect on climate change. Do you see opportunities to look for value rather than volume in commercial flights into your airport, therefore reducing overall admissions?

Adrian?

Thank you, Patrick and [ Kes ]. Look, one of the slightly sobering things, I think, actually is, despite the global lockdowns, the fairly moderate impact that it had on carbon. But -- and just, again, a bit of context, aviation globally represents about 2% of global emissions. But your point about value, I think, is relevant, and I think New Zealand is a high-value tourism destination. There's no question. Average days spent in our country is long compared to our peer group, and it is still the best thing for our country to seek high-value travelers to our country, who value what our country can offer. So I think from a tourism point of view, certainly, high-value tourism is still our country's sweet spot and our focus longer term. But there are other dimensions to value, which also go to the importance, I think, of aviation. And that -- those are things like cargo, and I think we're seeing the impact of that right now in our country, where cargo capacity because of the belly hold capacity that's been lost in passenger aircraft is down about 40%, and cargo rates are up almost 4 to 5x of what they normally are. So both from a tourism point of view and an export and import trade point of view, I think those connections remain critical for our country, and we'll continue to work on rebuilding those vital air links to reestablish our country's connection to the world.

Thanks, Adrian, and those of you who are in small business or even big business and you have a failure of a part that has to come from Italy or something, you'll be seeing the impact of air freight. Something that always reliably come in 10 days, can be 10 weeks or much longer at the moment, and there is a real impact on New Zealand business on that. And we are an export country, and you can do so much on Zoom, but sort of maintaining the relationships with the countries we're selling to physically is still very necessary in the long run. So it is crucial to our economy before we even talk about tourism. Thanks, [ Kes ]. Next question.

Question from few of the shareholders. When will dividends return?

I would love to say as soon as possible. And I guess that is the answer, but we have a -- as part of our covenants, which are out to the -- basically 18 months from now, I think, Phil, we had a 2-year hold on dividends. So it's very difficult to see them returning before that.

Another question. Is the rail line between the airport [ a worry ] going ahead in the future?

Adrian?

Well, that's clearly a conversation with NZTA, Auckland Transport and the like. We've been working very closely with those organizations as well as the work that went around Light Rail last year. It was concluded before the election. So we've been as close as possible to that development. We are generally very supportive of better public transport connections. And so the work, for example, we're doing on -- with NZTA Waka Kotahi on adding mass transit lanes to State Highway 20B to connect to the Puhinui main line train station upgrade is an important part of that, an example of our commitment. So while the questions around rail, light rail or mass transit modes for the future remain an issue for government and government agencies, we are closely working and will support that development over time.

Another message here. Auckland Airport team, first of all, I'd like to say thank you for all the effort during this period. It's an outstanding performance considering what a tough year we've had. I hope Adrian and the team are not going to leave us during this period, please. My question is, is there any potential projects outside of the property business to add extra revenue profit to the business?

Probably yours. [indiscernible]

Thank you, Patrick. Look, we're always -- 2 things: We're mindful of the conditions we're operating under in terms of the challenging business circumstances, but equally, as Patrick mentioned, we've still continue to get strong inbound inquiry for high-quality property opportunities and as a consequence of the great work the team have done to build up the property portfolio over many years. We are still restless and looking for opportunities. So if I think about small things that are close to the future, we've launched or extended our online retail channel activity into domestic. It was previously entirely focused on international, but we've tried to repurpose that and refocus on where our, I guess, passengers are now, and we'll continue to look for those opportunities. But the single most important thing I think we can do is help the government to focus on reestablishing air links, particularly with Australia and Pacific Islands. Just to give you a clue on that, if we can get domestic back to -- close to where it was previously, if we can get Australia traveling to the same level and Pacific Islands, that represents about 75% of the passenger volumes we had in 2019 financial year. So it's a very significant opportunity. So that safe border work that we talked about before, continues to be, I guess, the most important priority for us to work with government on.

On the assumption that domestic travel will soon return to normal and the capacity of the terminal may be a challenge, when do you plan to recommence work on a new domestic terminal?

I'll get Adrian to comment on this, and I'll say, it's not just the passenger numbers that challenge it, but security sort of requirements at airports are increasing all the time. And the domestic terminal, we're conscious, there's going to be a period where it's -- sometime in the future where it's going to struggle to address those, but Adrian?

Yes. Thanks, Patrick. Look, we are working -- literally, we have not wasted a day even during lockdown to just rethink about the various parts of redevelopment. We naturally need to again reflect the conditions we are operating under, the status of the airlines and where their recovery is at, but we need to look out ahead and chart that that course. So we are actually working very hard on that. We haven't got anything to say right now on that because that work needs to continue with the airlines and our government agencies and other partners. But I can be assured we're hard at work. And as soon as we're clear on that path and timing of that, we want to get going again.

The next question. Do you think the Board should be downsizing?

Well, it's a good question. And actually, it's something the Board's sort of discussed. We currently run at 8, which is our maximum, and have done for many years. And in the ordinary course of events, we'll have a director retiring in about a year's time. And our view at the moment is we would probably go to 7 at that point, but that's always contingent on having the right skills and experience on the Board. I mean with quite a wide-ranging business, and we've got to cover some, other than aviation, quite a wide range of capabilities. So our anticipation is, we may -- we'll probably go to 7, if we're happy that we do have the range of experience with the current directors on the Board. Good question. Thank you.

You said no dividends are being paid this year. Does this include the major shareholders as well or just the minor shareholders? If major shareholders are getting paid, why?

No. It's the same for all shareholders.

What is your worst-case scenario in terms of time line for business returning to normal e.g., 2019 levels?

Not sure how we answer that one.

Yes. Look, no one really knows. I think that's the honest answer. I think Julia mentioned this before. We've worked very, very hard to try and assess a range of different scenarios, looking in detail at different markets and what that might look like. But I think the reality is, we're still learning about how this virus acts and behaves, and what are the right ways to manage and control risk. I think IATA and some of the global organizations sort of highlighted a 3-year period to full 2019 recovery at a global level. We've sort of indicated that we are a little bit more conservative than that, and I guess that reflects a few things. Maybe New Zealand's virus management strategy is probably more conservative than other countries as they are managing it in different ways. And I think we're just choosing to be a little bit more prudent and suggesting that time to recovery may take longer to get to full recovery than IATA. But we also know things can change quite dramatically. An example is the reopening of Australia to New Zealanders. While it's not 2 way, that has been pulled forward potentially from our earlier expectations. Now that's -- that 2-way work is still critical for that to be meaningful to us, but that's a sign of how countries are starting to respond and change their strategies, and that will ultimately shape what our recovery looks like, too.

Yes. It's worth commenting, if you look forward, we are going to have vaccines of some efficacy, quite a few of them, but COVID is not going to go away. It will be around the world, and we'll probably have to live with it as we live with the flu. New Zealand has done very well and compliments to the leadership, the government, and I think the regime -- but the regime we've got at the moment is not, as we know, 100% secure because we're bringing people from risky countries and putting them through quarantine. What is encouraging is, now we seem to be getting to the point where when it does get into the community, we can stamp on it, and it's partly a credit to, I think, New Zealanders and the way we behave and understand the problem. So I think there is definitely a point, and it's not forever away where we're going to have to live with this thing with vaccines, et cetera and with a very intelligent border regime. So we no longer treat people from, dare I say, Russia the same as we treat people from Australia. It's got to be totally risk-based, and we believe we can put in a risk-based system that will have no higher, probably lesser, risk than we're running currently, but we'll work through that with the government. But there is clearly a time where it's got to go back to whatever normal is. Adrian, you have comments?

No, I agree.

Another question about dividends. I believe there must be dividends to shareholders as the company is still doing well. Why are shareholders the first to be affected?

I don't know. I mean it's just -- the company -- we are responding well, but our revenue is a fraction of what it normally is. And we've got debt to service, et cetera. Ultimately, dividends are a payment of surplus, and at the moment, we do not have surplus. So that's just the reality, and that's the risk of being a shareholder, and we do thank our shareholders for their complete understanding of that.

This shareholder says, please excuse the fact I had problems logging on until well into the meeting. First, well done to the management team for keeping the airport running through hard times. What is the current status on the second runway? Will the airport facilities or airport hotels be used as quarantine facilities? Or is that happening already?

I'll answer the first one, if you like, and Adrian, absolutely, will answer the second one. Look, the second runway, we have it planned. We've got consents for it. When it will actually be required, we don't know. The day has quite clearly moved out, but we -- we'll keep it there as an option. And that option value is enormous. But when will it be needed? Well, it's somewhat later than it would have been needed is probably the safest answer you can give. Quarantine.

Yes. On quarantine hotels, yes, we have of our 2 hotels, Novotel and the Ibis, the Novotel is operating as an isolation facility, and that is a partnership with obviously Ministry of Health. Our other hotel is not currently, still servicing the public, and the 2 hotels under construction are being closed in from a facade point of view, and those projects will be paused in the current conditions. But we are continuing to talk to [ MOHS ], just as you won't be surprised, around all of the broader thinking around border servicing, health control testing regimes, and that includes facilities supporting those processes. So that's an ongoing and very detailed engagement.

Thanks, Adrian.

What are you doing to make air travel as much as an airport can more inviting to domestic travelers because this may be the main part of travel for a while.

Adrian, that's a good one.

Yes. Well, look, I think the focus for the team now given that international passengers are down about 97% is clearly making that domestic experience as seamless and as slick as possible. It is working very, very smoothly at the moment and very well. Our numbers are still down, but our -- so our short-term focus is making sure that is functioning as well as a [ canon is ] -- and it's a good experience right now. Medium term and longer term, it's clearly focusing on the longer-term development of domestic capacity. And as I mentioned before, we're hard at work on that right now, reusing what we can about the plans that were fairly well cooked, but rethinking those and recasting those in a post-COVID world. So there is a lot of work going on around that medium- to long-term picture, and as soon as we're ready and as soon as we've completed that work with airlines, we'll be talking more publicly about that.

It's worth. I mean, as a business traveler. One of the big frustrations used to be traffic, and we've done a lot in the past couple of years to manage the traffic and through the busy summer pre-COVID, we actually did very well on traffic. But you'll notice we continued with the upgrade of George Bolt, live transit lanes and all sorts of things, and we decided that was essential. And it's probably is one of the biggest sort of back days for Auckland business travelers and leisure travelers more and more of them. It was the old days when we'd get caught on motorways. So we're doing our bit on that, and we do see it as essential.

Thanks, Patrick. There is no further questions online at the moment.

Okay. Well, thanks for those, some pretty good questions. And look, shareholders, you're always free to contact us, and you are our owners and we'll try and answer any sort of questions you have like that about travel, et cetera, that we can. Our door is always open. Now shareholders who have not already voted, should now submit their votes. And as I said, the results of the polls will be announced to the NZX and the ASX later in the day. And thank you all for your participation in this year's annual meeting and again, for your ongoing support for the airport. I now declare the meeting closed.