Taking off: Airport chief’s ‘heartbreaking’ decisions in the face of Covid 19

For Adrian Littlewood, the magnitude of the looming pandemic became clear from personal contacts overseas.

Early last year, soon after reports of a mystery virus filtered out of Wuhan, the Auckland Airport chief executive got a message from a friend who worked for a multinational in China, telling him that full pandemic preparations were being made.

And as the airport was preparing to reveal the next stage of its multibillion-dollar expansion programme at its half-year profit announcement last February, Littlewood took a call from a Kiwi businessman in Italy, who told him one of his mangers was in intensive care and on a ventilator.

“I remember taking this call in a carpark and thinking this is serious and things are starting to really escalate.”

Littlewood this month finishes a nine-year term as head of one the country’s biggest companies, and early last year he was facing a crisis like no other. In early February came the Wuhan evacuation flight and then bans on arrivals from an increasing number of countries, with the border closed to non-citizens on March 22.

Although the company did commit to new terminals, roads and hotels at that February announcement, within weeks it had made what he calls the “heartbreaking” decision to suspend many of those projects, adding up to $2 billion of capital works, and began scrambling to shore up its balance sheet.

The previously utterly dependable earner was facing the unthinkable. “It was just a cascade of issues,” says Littlewood.

“Within a few weeks from the results the door was shut. We’re raising a billion-plus dollars of equity and our world had completely changed.”

He and a tight team of executives and advisers worked around the clock, and he remembers one event when 350 global investors dialled in to hear the airport’s pitch. The successful $1.2 billion equity raise and extension of $700 million in bank commitments were nailed down in early April last year. That was satisfying.

“That was a dramatic period and we were trying to land a big equity raise at the same time as renegotiating all our bank covenants and arrangements. We did the largest secondary market raise on the NZX and had the longest ever covenant waiver for US private placement globally.”

Back then the airport was looking to raise funds and get through to December this year (it now has a bond offer in the market) and Littlewood says it was during those talks with financiers that the idea of a transtasman bubble first came up as a means of helping recovery.

Littlewood, a trained lawyer, took each day at a time during that intense period, which included dozens of board meetings, the need to let go a third of staff, and tell them remotely, and the requirement to run a safe and efficient operation as unfamiliar airlines and aircraft swooped in to repatriate citizens and usual services stopped almost completely.

It was a case of dealing with the unfamiliar methodically.

“With these kinds of challenges, you just focus your mind on a different set of problems and you just go hard, but that’s what Covid has been like every day — there’s been new issues popping up that we would have to deal with.”

The airport, airlines and the wider travel industry have had to deal with Covid since day one and have been hit harder than any other sector.

“We’ve been living with this every day and it feels a little bit like the rest of New Zealand was sort of in splendid isolation and not having to worry too much about Covid. It’s only been in the last five, six months that it feels like the rest of New Zealand has been living with what we’ve been over the last 20 months.”

Airport of the future

Littlewood was born in Britain while his parents were doing an extended OE, and lived in London for his first four and a half years before coming to New Zealand.

After following his father into law, he returned to London where he worked in the City. He figured out that he was more interested in what his clients were doing than he was in acting for them and he launched into telcos, including Telecom, before joining the airport as general manager of retail and commercial in 2009.

Non-aeronautical revenue grew quickly and when CEO Simon Moutter left in 2012, Littlewood, then aged 40, took over as chief executive.

A big lure was the opportunity to be part of the growth in tourism, which was flat at the time but had enormous potential. First came the need to rapidly scale up the airport’s preparedness for that growth and work on developing a plan, released in 2014, outlining “The Airport of the Future”.

This was a 30-year vision that included an integrated international and domestic terminal, a transformation of ground transport and turning back on plans for a second, northern runway.

But around the same time as the plan’s release, the future arrived early.

Littlewood says a combination of factors meant arrivals boomed, with the emergence of the middle class in Asia, particularly in China, where the wealthy suddenly had more freedom to travel.

A new generation of aircraft was also coming onto the market, after years of false starts. Boeing 787 Dreamliners and then Airbus A350s meant running costs on ultra-longhaul routes came down, at a time that happily coincided with steep falls in fuel prices.

By 2019 more than 20 million passengers a year were passing through Auckland Airport in what was the Golden Age of Travel.

“That suddenlydemocratised travel and made it accessible to a far greater number of people. And it all happened within a very short period of time.”

New Zealand had an attractive tourism product and participated in a travel boom that was even more pronounced in other countries.

“It felt like there was a period of, every month or so a new airline was turning up and that was a period of dramatic change for the whole industry and certainly for us.”

All that change came with growing pains. Traffic snarls in 2016 were a problem around Christmas, and just before the pandemic struck, a crumbling runway led to flight cancellations and urgent repairs.

“Suddenly we were confronted with double-digit growth in a very short space of time; it takes time for that infrastructure to catch up.”

But Littlewood, and the executive he had reshaped, worked on quick fixes while remaining focused on building 50-year assets. Along the way, they developed processes that he says could be used in other parts of the economy; the key was to get everyone involved early.

“The difficulties of using the traditional serve-and-volley approach to design and response is where you do a huge amount of work on a design, you pass it over to the stakeholder group, and then they spend a couple of months thinking about it and come back to you with a whole lot of questions and issues, and then you go and do a new design and then serveit back.”

That chewed up an enormous amount of time and energy.

“I think we learned the hard way that that’s just not the way that you can get these big projects done, and we shifted to a much more collaborative model that we’ve used time and time again in the last few years.”

He pushes back at criticism that the airport is a commercial property and retail company that just happens to have a runway. Aeronautical investment is running at historic highs and he points out that it is the big property and retail portfolio that helps pay for this, and has kept cash flowing at a time when revenue from passengers has largely dried up.

What now?

With Auckland’s prolonged lockdown paralysing domestic flights and international passenger loads dictated by space in MIQ, there are fewer passengers passing through the airport each month than when it first opened in 1966.

But Littlewood is confident this will change soon, perhaps faster than many people expect.

New South Wales – now open – was a clue to the travel future of vaccinated Kiwis.

“But I think we’re in the fuzzy transition period right now, where we’ve gone from where we were living without Covid but we now have Delta and Auckland has been locked down for a long time now. Tolerance is running out for that and there’s a step path out back to a new normal.”

Auckland was about six weeks behind NSW in terms of dealing with Delta, and the rest of the country was about six weeks behind Auckland.

“I think [the aviation restart] will happen slowly and then very quickly.”

Before the pandemic, Auckland Airport attracted close to 30 airlines, which flew to 45 international destinations. The company was working hard on making sure they come back.

“Our relationships with the airlines and the feedback we’re getting is very positive about New Zealand as a destination. They do want to connect but need to know when and how.”

While some infrastructure projects will need a full recovery in air travel – which the airport believes could be at least two years away – physical enabling work on the domestic jet terminal will begin early next.

Littlewood will be replaced early next year by Air New Zealand chief operating officer Carrie Hurihanganui. Shane Solly, director and portfolio manager at Harbour Asset Management, says he’s handing over a business that despite the ravages of Covid, is in good shape. Its recapitalisation was helped by the high level of confidence in the board and management of the company, which has balanced the need to urgently cut spending while keeping an eye on the long term.

“I think Adrian is leaving this business in great shape after what has been the most challenging of times for any executive,” says Solly.

Littlewood is non-committal about his next move. He’s been one of the most prominent voices in the business response to the pandemic, part of a working group to facilitate the resumption of travel, pushing to allow the importation of rapid antigen testing,and taking a firm line with staff and now visiting workers on vaccination requirements.

He was co-chair of the Australia New Zealand Leadership Forum for five years, and worked closely with senior politicians and officials.

One of his aviation sector contemporaries, former Air New Zealand boss Christopher Luxon, has made the leap into politics.

Would he?

Not likely. “I’ve always been willing to help. But I have no interest,” he says.

“I always take my hat off to those who put their hand up because it’s a hard gig; we need good people to get into politics but I can probably be more helpful not being a politician.”

When he finishes, there will be more time with wife Claire and their three children aged 11 to 18.

“I’m just going to take some sort of enforced time off and I’m lucky to be in a position where I can do that,” he says.

“I have plans to travel with my wife and family – when that’s allowed.”

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