International arrivals drive Sydney Airport profits upwards

The company reported a 7.7 per cent growth in international travellers in the six months to June 30.

Sydney Airport chief executive Kerrie Mather. Picture: James Croucher.

Sydney Airport has forecast that a surge in international flyers will continue to outstrip the growth in domestic passengers at the ­nation’s busiest airport after it reported a higher net profit for the first six months of 2017.

The company reported that 21 million passengers passed through the airport in six months to June 30 including a 7.7 per cent growth in international travellers from markets including China, compared to a 1.3 per cent growth in domestic flyers.

It reported a 4.4 per cent rise in net profit to $167 million for the first half and upgraded its full-year guidance for distributions.

Sydney Airport managing ­director and chief executive Kerrie Mather said international traffic now represented 36 per cent of passengers at Kingsford-Smith Airport and would become an increasing part of the mix.

“That’s an enduring trend,” Ms Mather, who announced her resignation in March, told The Australian yesterday.

A number of factors were driving this, Ms Mather said, including “the destination appeal of Sydney and the proximity of the CBD to the airport and the airport to many of the major tourist attractions, our catchment area … all of those things are actually important drivers of inbound growth”.

Sydney Airport had started work on forecasts for its 2039 master plan, which would be the first such plan to include analysis of the impact of a new western Sydney airport that the government would build, after Sydney Airport turned down its “right of first refusal” to build and operate it.

The company revealed it had spent $600,000 on costs associated with the Western Sydney Airport in the first half.

As it confronts the prospect of a two-airport system from 2026 and continued passenger growth, Sydney Airport also revealed it had begun talks with airlines on the next phase of its expansion to international capacity.

Pointing to a positive outlook for the second half and an improved business performance, the company upgraded its 2017 distribution guidance to 34.5c a share, up from 33.5c. It declared an interim distribution of 16.5c, compared with 15c during the same period last year.

Sydney Airport reported a record growth in inbound tourism of almost 10 per cent over the previous corresponding period over a rolling 12 months. Ms Mather pointed to the performance from Asian markets including China, India, The Philippines, Indonesia, Japan and Vietnam.

Ms Mather said airlines were using larger aircraft, increasing seat density and were being encouraged to use the airport during off-peak hours.

The company reported earnings before interest, tax depreciation and amortisation were up 7.7 per cent because of the surge in international traffic, returns on capital spending on aviation assets, and retail trade on the back of a refurbished luxury shopping precinct.

Moody’s Investors Service said it expected a further improvement in earnings.

Moody’s vice-president and senior analyst Spencer Ng said: “In particular, we expect international passenger traffic to continue to grow in the mid to high single-digit percentage range, underpinned by a combination of strong travel demand, as well as seat capacity additions that had ­already been announced by international airlines.”

Mr Ng said Sydney Airport’s plans to invest in capacity would further entrench its position before Badgerys Creek opened in 2026.

But the growth in car parking and ground transport revenues was comparatively modest at 2.2 per cent to $77.1m, as more people travelled by train or used ride-sharing or limousine services.

Along with companies such as BlueScope Steel, Wesfarmers and Stockland, the airport was hit by higher electricity prices.

Shares closed up 3.4 per cent at $7.08.