Jun 8, 2023

Markets wrap: Aviation dominates both on and off the sharemarket Aviation news was the topic of the day, only some of it on the sharemarket as politics swirled around Auckland International Airport shares. In sharemarket news on Thursday, Air New Zealand upgraded its profit forecast and Auckland International Airport flagged higher aeronautical charges. Outside of the bourse, Michael Wood, the MP for Mt Roskill and a Cabinet Minister, said he had sold his Auckland Airport shares that have been a source of controversy and which led to him being stood down as transport minister. Wood owned just over 1500 shares (worth an estimated $13,000) in the airport company that he bought as a teen. He had been approached 12 times by the Cabinet Office since November 2020 wanting confirmation that he had divested the shareholding. On Thursday, he said he had made a serious error and confirmed: “As of today, I have taken action on that in selling the shares.” The sale of Auckland Airport shares was also the centre of attention in local government politics as Auckland Council met to vote on the annual budget, including a proposal from Mayor Wayne Brown to sell the council’s stake in the airport to repay debt. As the meeting progressed, Brown suggested a compromise option of partially selling the stake, which would see it exit 8.09% of its 18.09% stake. Anna Whyte/Stuff Suspended transport minister Michael Wood says he asked his new stock broker to sell his Auckland Airport shares on Wednesday morning. Auckland International Airport slipped 0.06% to $8.58 after it announced increases to its aeronautical charges paid by airlines for the next five years, taking effect from July 1. Airport chief executive Carrie Hurihanganui said the new charges would fund part of the much-needed investment in infrastructure that is underway at the airport. But airlines said the cost the development would flow through to higher airfares. Air New Zealand and Qantas Airways said they had provided the airport with analysis of how the increases would impact their networks, showing the cost of the redevelopment would increase airport charges to the point that air travel may become unaffordable for a significant number of travellers. Hurihanganui said Auckland Airport’s aeronautical charges would be rising from a low base and made up a small portion of an airline ticket. She said the ongoing recovery in aviation was strong and there was a need to invest in critical aviation infrastructure for the future. Air New Zealand gained 1.3% to 78 cents after raising its annual profit forecast for a second time in just a few months.The stock has gained 23% over the past year. The national airline said it expects profit before tax and one-time items of at least $580 million in the year to the end of June as it benefits from strong demand for travel and weaker jet fuel prices. The latest guidance is ahead of the airline’s April forecast for profit of $510m to $560m, and its initial February forecast of $450m to $530m, and would mark a turnaround from a pre-tax loss of $725m last year. “Since the previous update, the airline has experienced stronger ongoing demand than usually observed at this time of the year, which is typically considered the airline’s off-peak period,” the company said in a statement. “In addition to this, US dollar jet fuel prices have declined even further and have been consistently below those assumed in the earnings guidance provided in April.” Air New Zealand is in recovery after being hard hit during the pandemic as international borders closed to travellers. Still, the company said it was “mindful” that it was facing an uncertain economic environment next financial year. The benchmark S&P/NZX 50 Index slid 0.4%, or 43.406 points, to 11,715.74. On the broader market 43 stocks rose and 81 fell with $162m shares traded. Infratil fell 2.5% to $9.85 after coming off a trading halt. On Wednesday , Infratil said it had agreed to buy the remaining half stake in telco One New Zealand from its partner Brookfield Asset Management for $1.8 billion. The investment company’s shares were halted while it arranged the sale of 81.5 million new shares to help fund the purchase. The company’s shares resumed trading on Thursday after it said it had successfully raised $750m selling stock at $9.20 a share, which is an 8.9% discount to the last NZX closing price on Tuesday. Infratil chief executive Jason Boyes said he was very pleased with the strong level of support. The new shares are expected to start trading on June 14. The company plans to offer $100m of shares to retail investors on June 13. Forestry prices, which rose to record highs around this time in 2021, are now looking much more subdued and are unlikely to recover this year, according to ASB’s rural quarterly report. ASB economist Nat Keall notes the forestry sector is by far the most dependent on the Chinese market, so has suffered the most from the Chinese slowdown. Some 60% of New Zealand’s forestry exports are China-bound, compared with about 40% of dairy and meat exports, and only 20% of horticulture exports. While some exporters will be hopeful that a strengthening Chinese property market will boost demand, Keall said any price gains were likely to be modest as China’s recovery is expected to be consumption rather than investment led. Keall also sees little hope of support from the domestic market. “While the strong near-term pipeline of building work has kept construction activity looking pretty resilient up until this point, comparatively high interest rates and cooling house prices are increasingly weighing, with business surveys showing construction expectations are deeply in the red,” he said. That dynamic is set to remain a feature over the remainder of 2023 and the beginning of 2024, he said. “The housing market will turn eventually, but probably not until next year,” he said.