"Melbourne, Australia airport in flying start to profits"

Wednesday, June 26, 2002

Airport in flying start to profits
By Richard Salmons
Australia - The Age


Melbourne Airport is preparing to meet a privatised Kingsford Smith head-on,
having used a five-year head start to restructure its operations and push
towards profitability.

Despite the disasters of last September, management said the airport had
proved to be a strong investment, with revenue just over half of Sydney's,
even though the government sold Melbourne for one-quarter the price in 1997.
And thanks to a recent Productivity Commission ruling deregulating aviation
charges, revenue was expected to grow next year.

"It's served us very well to have to work harder than them," Melbourne
Airport corporate affairs manager Geoffrey Conaghan said yesterday.

Mr Conaghan said he could not claim Melbourne Airport would break even this
financial year, as planned, thanks to the twin disasters of September 11 and
the Ansett collapse three days later. The latter was so devastating that it
was known around the airport as "S14".

"Ansett represented 20 per cent of our revenues," Mr Conaghan said. "Other
than terminals and freight, there was staff administration and car park
leases. But thanks to the fact that S11 and S14 occurred early in the piece,
we were able to do a number of restructures."

The airport was able to pull forward revenue-creating projects such as
opening new food outlets. But Mr Conaghan admitted: "We're still in
post-Ansett recovery mode."

Before last September, Melbourne Airport had increased cashflow from $98
million in 1998 to $140 million in 2000-01. Last year's net loss was $9.7
million. Total revenue last financial year of $195 million was 52 per cent
of Sydney's, while passenger numbers were two-thirds.

This has left Melbourne Airport shareholders sceptical about the Sydney
Airport sale price of around $5 billion, four times Melbourne's 1997 price.

Melbourne's revenue growth was driven by a strong push for property income.
Soon after privatisation, the sales breakdown was about 40 per cent from
aviation charges, 38 per cent from retail and 22 per cent from property, Mr
Conaghan said, but revenue was now split almost equally between the three.
Post-privatisation property projects included the Hilton and Formula 1
hotels, freight facilities, the express terminal used by Virgin Blue, and
office developments.

Melbourne Airport is owned by Australia Pacific Airports Corp, of which AMP
owns half, Deutsche Asset Management 25 per cent, British Airports Corp 15
per cent, and Hastings Funds Management 10 per cent.

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