Defensive investors with an eye on the long term should consider monopoly type infrastructure assets such as Auckland International Airport Ltd (ASX: AIA).
This morning Auckland Airport posted strong passenger growth numbers as international passengers were up 5.4% in February 2015 (compared to February 2014), with the key growth driver being a surge in Chinese visitors over the Chinese New Year travel period.
The 1.4 billion people of China are travelling increasingly more and this is a trend set to accelerate with Sydney Airport Holdings Ltd (ASX: SYD) also reporting a 23.7% boost in Chinese visitors in February.
For Auckland Airport in February Chinese visitors were the commonest non-Australia and New Zealand arrivals. The amount arriving almost double the numbers of visitors from the United States, the nearest rival.
Both Sydney and Auckland airport generate revenues through aeronautical and non-aeronautical fees. The monopoly like positions provide leverage to increase airline, car-parking, or retail rental fees as most people or airline operators have no alternative but to use the airports.
Both businesses are also able to save on costs through technological improvements and streamlined processes. A prime recent example being ePassports, which use computer chips and biometrics to let certain international passengers pass border control on an automated basis.
Unsurprisingly, both Sydney and Auckland airports have been bid up in price by investors keen to lock in decent yields backed up by solid long-term prospects for earnings growth.
Travel is an international growth industry but investments in the sector should be part of a balanced portfolio as it could take a significant hit if there were a terrorist act or global health epidemic.
