The Sydney Airport Holdings Ltd (ASX: SYD) share price could come under pressure following its decision to knock back the Government's proposal for the Western Sydney Airport (WSA).
SYD Share Price
The chart above compares the Sydney Airport share price to the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
What happened today?
In an announcement to the ASX this morning, Sydney Airport Holdings updated shareholders on its offer to develop and operate the proposed WSA.
Having engaged contractors to estimate costs and undertaken a review of the supply and demand expectations, Sydney Airport said it knocked back the Government's Notice of Intention (NOI) for WSA.
"Sydney Airport's decision not to accept the WSA NOI on the terms provided is in the best interests of our investors who represent millions of Australians through their superannuation funds," Sydney Airport Holdings CEO Kerrie Mather said. "Despite the opportunities that WSA will present, the risks associated with the development and operation of WSA are considerable and endure for many decades without commensurate returns for our investors."
What now?
Sydney Airport Holdings has long held a monopoly over flights in and out of Australia's largest city. Charging airlines for access to its runways and retailers to set up shop in its terminals has provided a steady stream of revenue to the company and dividends to shareholders.
Like other monopoly businesses such as Transurban Group (ASX: TCL), an owner of toll roads, and Auckland International Airport Ltd (ASX: AIA), Sydney Airport Holdings' asset is key to earning superior profit margins over the long run.
However, it is also worth noting that the company had completed substantial due diligence on WSA and will not participate in the development because it is not viable, which is promising.
Buy, hold or sell
Earlier this year, the Sydney Airport Holdings share price was falling fast on fears of the development of WSA. However, a complete second airport is still 10 years away, and demand from local and international travellers is expected to increase still.
Therefore, while it may not be great value right now, if the company's share price continues to fall I'll consider it a buying opportunity.
