Sydney Airport keeps growing passenger numbers

The business has provided an average annual return of 13% since listing in 2002.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published September 21, 2013 7:05 am AEST

Sydney Airport (ASX: SYD) reported strong international passenger growth in August, increasing 5.6% on 2012's numbers.

Tourism also got a boost when the first ever Boeing Dreamliner flight touched-down direct from Delhi. India has significant growth potential and was Sydney's largest unserved market until then. After encountering a number of problems since entering service, the Dreamliner's arrival was welcomed in Sydney. Said to be the first of a new generation of aircraft, a number of the latest 787-9 models are to be delivered to Air New Zealand (ASX: AIZ) in 2014.

Larger aircraft have the potential to be more profitable for all airlines and have already transformed airport usage. Sydney Airport reporting that since 2000, passenger numbers have increased by 46%, while actual take-offs and landings have only increased 3%.

In terms of international passenger traffic, the fastest growing market is Malaysia, and Malaysian Airlines is to commence a third daily service in February 2014. That will provide an additional 207,000 seats per year.

For the first six-months of 2013 the group reported a rise in revenues to $538 million, up 6.8% on the corresponding period. In the year-to-date total passenger numbers travelling through the airport are up 3.1%.

Foolish takeaway

A relatively low-risk business model combined with resilient cash flows have seen investors well rewarded in recent times. Passenger numbers are leveraged to economic cycles, but Sydney Airport still looks a solid long-term investment.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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