Coronavirus Creating Near-Term Headwinds for Auckland Airport, but Long-Term Fundamentals Solid

Auckland Airport is the largest airport in New Zealand, and most visitors to the country pass through its doors. Before the COVID-19 pandemic, it handled more than 11 million international and 9 million domestic passenger movements on a yearly basis. We believe the firm has carved a wide economic moat because it is a near-monopoly operating in a favourable regulatory environment. Long-run risks to returns are minimal, but largely revolve around a slowdown in tourism and traffic, given the firm's substantial fixed asset base and plans for further sizable capital investments. On balance, Auckland Airport benefits from substantial competitive advantages, and we forecast solid returns on capital over the long run.