Qantas, Virgin, Sydney Airport hit by Brexit, fuel costs

The end of cheap fuel, declines in passenger capacity and a delayed hangover from the Brexit vote have hit aviation.

Shares in Qantas have fallen 10 per cent since Friday’s Brexit vote.

The end of cheap jet fuel, declines in passenger capacity and a delayed hangover from Britain’s decision to leave the EU have hammered the nation’s airline and airport stocks.

Shares in Qantas fell 4.4 per cent, Sydney Airport dropped 3.98 per cent and Virgin Australia plummeted 6.67 per cent in yesterday’s trade in what has been a sell-off of airline stocks across global markets.

The fallout from Britain’s decision to leave the EU and its impact on consumer confidence continues to weigh on investors, with shares in Qantas falling 10.1 per cent since Friday’s historic vote, while Virgin has shed 10.64 per cent and Sydney Airport 2.91 per cent.

Airlines worldwide have been hit, with American Airlines having fallen 16.68 per cent since the Brexit vote, while its rival Delta is down 13 per cent.

The share drops across Australian airlines came as Credit ­Suisse analyst Paul Butler yesterday downgraded Sydney Airport to underperform, with a warning that the nation’s busiest airport could start to see a slowdown in passenger traffic.

Sydney Airport has enjoyed a 12 per cent spike in international capacity this year as seven new airlines joined the hub and as existing airlines added capacity due to lower fuel costs.

But Mr Butler thinks growth is in for a slowdown as the airport runs out of new airlines to ­attract.

“It is unusual for Sydney Airport to have such a large number of new airlines begin services to the airport. We think this is not likely to be repeated,” Mr Butler said. “There was a large step up in new airline capacity in December last year. The growth comps get a lot tougher once we get to this point, and we expect significantly lower growth thereafter.”

Tourists from China remain a strong part of Sydney Airport’s growth story, having increased 20 per cent over the past year, but Mr Butler pointed to a potential slowdown.

While Mr Butler has struck a bearish tone on Sydney Airport, analysts at Macquarie have taken the opposite view, saying the strong flows of international tourists and the resilience of the domestic market will continue to keep Sydney Airport growing.

“Sydney Airport remains in a sweet spot of passenger growth, with now six consecutive months of total passenger growth above 5 per cent,” the analysts said.