Turbulent skies for travel stocks

The reported covid community case in Northland is giving investors plenty to chew on.

Monday, January 25th 2021, 7:09PM

by BusinessDesk

Shares in Auckland International Airport and Air New Zealand fell in trading today as the market took into account more covid uncertainty after a woman who left managed isolation on Jan. 13 tested positive.

The S&P/NZX 50 Index rose 0.49 percent, to 13,399. Turnover was $166.1 million.

Investment adviser at Hamilton Hindin Greene, Grant Davies, said the new case raised the prospect of a new lockdown and showed how tenuous NZ’s covid free status is.

“Clearly if there was to be another lockdown it's not going to be great for the airlines and airports.”

Auckland Airport outlined the ongoing covid impact on its business today, releasing to the NZX passenger volumes for November and preview data for December.

Its shares fell during early trading, but rebounded to close up 1.9 percent at $7.50 with 1,426,869 shares traded. Air New Zealand shares finished the day's trading down 3.51 percent at $1.65, with 1,907,967 shares traded.

The airport had close to 70 percent fewer passengers through in November 2020 compared with the same period in 2019. International passengers, excluding those transiting, dropped 97.2 percent year-on-year.

December is looking just as bad, the airport said, with international arrivals down 97.3 percent on the same period in 2019.

For the 2020 financial year Auckland Airport recorded profit after tax of $193.9 million, down 63 percent.

Davies said passenger numbers dropping again was expected, but it’s another indicator that while things in NZ aren’t as bad as they are in other places, there is still a long way to go before things return to normal.

The outlook for the sector is one of the most uncertain due to the pandemic.

A report by Standard & Poors released in December said it expected a firm recovery won't start until at least late 2021 in Australia and New Zealand, a slower pace than its prior expectations.

“Recurring waves of covid cases remain a threat to the rebound for Australian and New Zealand airports and has also delayed the much-awaited trans-Tasman travel,” the report said.

The outlook on the airport sector remained negative, and the ratings on the eight Australian and New Zealand airports remained unchanged because it saw prospects for a modest and progressive recovery from fiscal 2022, it said.

There is something NZ’s airports have over their Australian counterparts; there are no state borders or the resulting border policies to contend with.

For this reason, S&P said New Zealand airports have steadily ramped-up domestic traffic since mid-May 2020, to 60-70 percent of pre-covid levels.

“Wellington International Airport and Christchurch International Airport, however, may perform better than our prior expectations in fiscal 2021 given that they have benefited from a ramp-up in domestic travel to date.”

Infratil, listed on the NZX, is the majority owner of Wellington International Airport while Christchurch City Council owns the Christchurch airport.

Infratil’s shares rose during trading after reports out of Australia that another suitor, IFM Investors, was keen to take over the Kiwi company. In early December AustralianSuper lobbed in an unsolicited cash and share offer of $7.43 a share to buy Infratil.

Infratil shares finished at $7.58, up 2.71 percent with 432,377 shares traded.

While shareholder ACC made supportive public noises about the sale, it’s understood Infratil is un-moved thus far by the Aussie overtures.

Davies said the loss of Infratil would be huge for NZ's capital markets.

The kiwi dollar was trading at US 71.93 cents this afternoon after trading between 71.67 and 71.98 overnight.

The trade-weighted index was at 74.72 at 3pm, from 74.83 on Friday.

The kiwi traded at 93.17 Australian cents on Monday afternoon from 93.04 cents on Friday, 74.67 yen from 74.74 yen, 59.11 euro cents from 59.33 cents, 52.56 British pence from 52.58 pence, and 4.6591 Chinese yuan from 4.6959 yuan.

Tags: Market Close