AVIATION

AIRPORTS AS ECONOMIC DRIVERS FOR LOCAL ECONOMIES AND COMMUNITIES

NORTHERN TERRITORY TRANSPORT FORUM 2012

PRESENTED BY JIM PARASHOS DIRECTOR OF AIRLINE & AIRPORT SERVICES

BACKGROUND

OVERVIEW OF DARWIN INTERNATIONAL AIRPORT Privatised in 1998 Owned by Airport Development Group Pty

Ltd 100% Australian owned, majority owned

Australian Superannuation Funds 2.3M passengers per annum Join User Facility (civil – military operations) Currently undergoing $50M terminal

expansion Four aerobridges 311 hectares (1258 hectares RAAF) 24 hour, curfew free operation 1,000 people employed aviation operations 800 people employed non-aviation

businesses

4

Darwin Airport is investing $100M in aeronautical related investments over the next 8 years

Australia’s Top End is developing as a narrowbody hub between Australia and the fast growing Asia region

Darwin will continue to grow as a significant tourism and business destination

Darwin has direct services to most key Australian cities

DARWIN AIRPORT FACTS

Current schedules cater for daylight services, or evening departures from east coast, arriving to Darwin before midnight

Return services depart morning, midday and late evening

Aim is for triple daily services via various carriers from most destinations

13 km from city centre (and no traffic)

KEY DRIVERS FOR AIR TRAFFIC GROWTH

Airport a significant contributor to economy, but not a driver

Most other actions drive activity, such as

business and tourism

KEY DRIVERS FOR AIR TRAFFIC GROWTH

Mining

Oil and Gas (Inpex, ConocoPhillips, Shell Prelude)

Defence including USMC

Federal Intervention Program ‘closing the gap’

Tourism

Darwin Convention Centre

Two iconic visitor destinations

– Red Centre

– Tropical Top End, Kakadu

Domestic Visitors to Northern Territory (FY2011)

DARWIN DOMESTIC PASSENGERS Domestic passengers represented approximately 80% of DIA’s total passengers in FY2012

Commentary

DIA is expected to handle 1.9 million domestic and regional passengers in FY2013, with volumes having grown from 0.9 million in FY1998 at an average compound growth rate of 5.2% p.a.

The five major interstate routes (Brisbane, Sydney, Melbourne, Adelaide and Perth) accounted for approximately 73% of Darwin’s domestic passengers in FY2012. Brisbane was the major route in FY2012 accounting for 20% of domestic passengers.

Recent service developments include the addition of Virgin services in FY2012, and increased services by Jetstar, Qantas and Airnorth to select domestic and regional locations

DIA Domestic & Regional Passengers (FY2002-FY2012)

Domestic Destinations FY2012

Adelaide 10%

Brisbane 20%

Melbourne 16% Sydney

18%

Perth 9%

Other 27%

Holiday 40%

Visiting friends & relatives

19%

Business 32%

Other 9%

0

500,000

1,000,000

1,500,000

2,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Domestic OD Domestic Trans

DARWIN INTERNATIONAL PASSENGERS Increased service developments providing international passengers with more options

Commentary

DIA handled total international passengers of 0.44 million in FY2012. Total international traffic has grown at an average compound growth rate of 5.7% pa since FY2005.

Jetstar remains the dominant international carrier with over 75% market share, with Indonesia being the main destination of choice followed by Singapore and Philippines

Recent additions to international services include Silk Air commencing 4 services per week to Singapore in March 2012.

International Passengers (FY2002–FY2012)

International Visitors to Northern Territory FY2012 International Destinations FY2012

Singapore 29%

Ho Chi Minh City 7%

Manila 10%

Denpasar 43%

Dili 10%

Other 1%

0

100,000

200,000

300,000

400,000

500,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

International OD International Trans Source: ADG Management

Holiday 75%

Visiting friends & relatives

8%

Business 7%

Education 4%

Employment 4%

Other 2%

STRATEGIES TO INCREASE OPERATIONAL EFFICIENCIES

PROJECTS

DIA TERMINAL EXPANSION The $60M expansion will include: $45M partial three-story building providing an additional 11,000

square metres of floor space and a new goods delivery area $15M in associated apron expansion and car parking works

Expansion will increase floor space by 65% and will be modular in design

NEW & EXPANDED CLUB LOUNGES

The existing Qantas lounge will be relocated and expanded as part of the new

Terminal Expansion

Virgin Australia have committed to opening a

lounge at Darwin International Airport

which has been very well received and long anticipated by the

travelling public

CHALLENGES

Challenging environment – High AUD

– Weak global economies

– High cost for domestic travel

Being a 24 hour low volume airport makes it difficult to achieve efficiencies

Environmental factors, including 24/7 air-conditioning, high operating costs such as electricity etc

It’s crazy to see hotels promoting Territorian specials to population of 130K, when airlines are offering cheap flights to key markets

If airlines can’t fill these seats, they simply don’t operate them. This is counter productive

Tourism sector challenging due to accommodation sector being occupied by higher yield business travellers

Airline and accommodation sectors are counter intuitive in many respects

Airlines Accommodation

Short decision making; in and out of markets within three months.

Long lead times and approvals. High fixed costs (such as airports)

When business demand high, restrict capacity and increase yields

With high business demand, increase room rates, impacting leisure travel

Reduced leisure travel means reducing capacity (volume v yield)

Less leisure travellers means less revenue in off peak times

If Australians travelling overseas in record numbers, inbound is soft, domestic is considered expensive as a stand alone destination and we need accommodation investment, what are our options?

DIA SUPPORTING & PROMOTING DARWIN STOPOVERS

DIA Website promoting Creative Holidays’ campaign ‘Discover Asia’ & the Top End

Benefits – Reduces low and shoulder seasons – Increases occupancy rates for hotels year round,

which provides appetite to investment – Keeps seats full on airline services year round,

providing year round access and capacity

Need to get the right balance between yield and volume to ensure the tourism and aviation sectors (including the airport) continue to grow

POSITIVES

Darwin well positioned geographically to capitalise on Australian outbound travel to Asia

High desire of Australians to visit the Top End, on the bucket list, but not just yet

Opportunity to give them a taste at little extra cost

Manila

Ho Chi Minh

Singapore

Denpasar (Bali)Dili (East Timor)

Maningrida, Milingimbi, Elcho Island, Gove

Groote Eylandt

Cairns

BrisbaneGold Coast

Sydney

Canberra

Melbourne

AdelaidePerth

Karatha

Port Hedland

Broome

Darwin

Tennant Creek

Mt Isa

Alice Springs

Kununurra

Manila

Ho Chi Minh

Singapore

Denpasar (Bali)Dili (East Timor)

Maningrida, Milingimbi, Elcho Island, Gove

Groote Eylandt

Cairns

BrisbaneGold Coast

Sydney

Canberra

Melbourne

AdelaidePerth

Karatha

Port Hedland

Broome

Darwin

Tennant Creek

Mt Isa

Alice Springs

Kununurra

Manila

Ho Chi Minh

Singapore

Denpasar (Bali)Dili (East Timor)

Maningrida, Milingimbi, Elcho Island, Gove

Groote Eylandt

Cairns

BrisbaneGold Coast

Sydney

Canberra

Melbourne

AdelaidePerth

Karatha

Port Hedland

Broome

Darwin

Tennant Creek

Mt Isa

Alice Springs

Kununurra

Manila

Ho Chi Minh

Singapore

Denpasar (Bali)Dili (East Timor)

Maningrida, Milingimbi, Elcho Island, Gove

Groote Eylandt

Cairns

BrisbaneGold Coast

Sydney

Canberra

Melbourne

AdelaidePerth

Karatha

Port Hedland

Broome

Darwin

Tennant Creek

Mt Isa

Alice Springs

Kununurra

DIA NORTHERN AUSTRALIA HUB STRATEGY – NEXT PHASE

Improve access from other regional ports. Make Darwin the preferred access point to Asia and other

domestic ports. “Own” Northern Australia

Townsville

Single terminal, 100 metres on foot transfer

No terminal change (unlike Perth, Sydney, Brisbane and Cairns)

24 hour flexibility

Flying in the right direction (why backtrack?)

Supporting other regional ports

Opportunity for joint marketing

Targeted audience – FIFO, business, tourism

Assists smaller regional carriers

- provide year round pax - leading to increased services - leading to increasing connection opportunity and flexible schedules - increased access which boost pax numbers - market growth which can be supported by data demonstrating opportunity for

direct flights to new ports

DARWIN’S SELLING PROPOSITION

NON-AVIATION PRECINCTS

DARWIN AIRPORT PROPERTY PORTFOLIO Airnorth $4M hangar and office completed 2001 Environment Australia building, completed 2002 AQIS building $6.1M completed 2005 CASA Building $2.5M completed 2005 ABC Childcare completed 2004 Bunnings Warehouse $10M completed 2006 Darwin Airport Resort $10M completed 2005 Darwin Airport Inn $17.5M completed 2008 Darwin Airport Lodge $16M completed 2011 AFP police station and K9 project circa $20M

completed Major Development Plan for $100M bulky

goods complex approved

COMMERCIAL DEVELOPMENTS

Rydges Airport Resort

Department of Environment, Water & Heritage

TOP END AERO MEDICAL RETRIEVAL SERVICE

TEMRS FACILITY An investment in aero facilities for CareFlight as the incumbent

operator of the NT Government Aero-Medical service for 10 years

Facility details: 1,820sqm Hangar

1,623sqm Offices (fatigue management/engineering offices/workshops/storage)

46 car parking bays

DIA to provide 24/7 Property and Facilities Management

5,500sqm Site

5,800sqm Aircraft Apron

Strategic Planning Session – 18 - 20 March 2012

TEMRS

ARDENT LEISURE

AXIS 12o130o aims to provide the first fully integrated, master planned and controlled commercial precinct of its kind within the Northern Territory

To create a vibrant, innovative, sustainable and community & user sensitive urban habitat offering premium facilities

The AXIS 12o130o Land Use Plan divides the 60 hectare precinct into four main development zones

The Master Plan will create a mixed-use environment for vibrant retail, commercial, bulky goods and entertainment precincts, supported by excellent public domain and community facilities including

AXIS 12o130o0o

Vision - To create a dynamic, integrated, activated entertainment precinct that will potentially include:

Family Entertainment Centre (FEC) including tenpin bowling and laser skirmish – commercial terms agreed in-principle; Board approval received

Petrol station – to be provided to Board for approval Cinemas – 2 parties interested; on-going discussions, pending FEC Drive-through fast food outlets – preparing proposal in response to recent

enquiry Children’s Playland and Café – discussions progressing Future expansion potential

ENTERTAINMENT PRECINCT

Indicative Concept Plan Entertainment Precinct

MYTHBUSTER

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$10

$20

$30

$40

$50

$60

Sydney Brisbane Cairns Darwin Perth Gold Coast Adelaide

Charges Breakdown International Return trip

Airport Charges Government Mandated Security Charges

AIRPORT CHARGES

SUMMARY

Darwin Airport is investing $100M in aeronautical related investments over the next 8 years

Australia’s Top End is developing as a narrowbody hub between Australia and the fast growing Asian region

Darwin will continue to grow as a significant tourism and business destination

DIA is in negotiations to increase the number of direct services to key Australian cities

THANK YOU