Sydney Airport has released a very strong full year result for 2015, and has entered 2016 with a significant increase in monthly passenger volumes
Sydney Airport has released its full year result for 2015 (for the ASX announcement click here
), and January passenger traffic numbers (click here for more details).
The FY15 result was very strong, highlighted by strong growth in international passenger numbers, signing a new five year aeronautical agreement with the international carriers, and continued improvement in interest coverage. A summary of the FY15 is provided in the table below:
Source: Sydney Airport
FY15 highlights:
- Total passenger growth of 3.0%, with international passenger growth particularly strong at 4.3%, reflective of capacity increases as well as the positive impact of a weaker currency. Six new airlines commenced services over the year and seven new international airlines (1.5 million new seats) will be commencing over the next 12 months
- Revenue is up 5.6% to $1.23bn, while EBITDA is up 5.8% to $1.0bn. Both EBITDA and revenue growth have exceeded passenger growth plus inflation highlighting the strength of Sydney Airport’s monopoly position
- Aeronautical revenue was up 6.8% to $606.7m. Sydney Airport signed a new five year aeronautical agreement with international airlines, with average aeronautical price increases of 3.8% pa over the next four years to reflect additional investment by Sydney Airport into the airport and its facilities
- Car parking revenue up 7.6%, driven by healthy growth (33%) in online bookings
- Total interest coverage continues to improve, from 2.32x to 2.45x. There was a temporary increase in the net debt / EBITDA ratio from 6.9x to 7.4x due to drawdown for the Terminal 3 acquisition. The progressive improvement in Sydney Airport’s interest cover metrics is highlighted in the figure below
Source: Sydney Airport
In relation to the second Sydney Airport proposed for Western Sydney, the Australian Government is expected to finalise the Environmental Impact Study (EIS) and Airport Plan and issue a Notice of Intention (NoI) in 2016. Sydney Airport retains its right of first refusal in relation to developing the second Sydney Airport and will evaluate the NoI when it is released later this year.
Sydney Airport’s traffic figures for the month of January 2016 show significant growth versus the prior corresponding period, in particular international passenger numbers which have grown 9.5%.
| Passengers | Monthly performance | Year to date performance |
| ('000s) | Jan 16 | Jan 15 | Growth (%) | YTD 16 | YTD 15 | Growth (%) |
| Domestic | 2,221 | 2,090 | +6.2% | 2,221 | 2,090 | +6.2% |
| International | 1,433 | 1,308 | +9.5% | 1,433 | 1,308 | +9.5% |
| Total | 3,654 | 3,399 | +7.5% | 3,654 | 3,399 | +7.5% |
Source: Sydney Airport
We remain highly supportive of Sydney Airport as a credit and reiterate exposure to the Sydney Airport bonds in any fixed income investment portfolio. We believe the continuing macro themes of a weaker Australian dollar and low oil prices are positive for inbound international passenger traffic into Australia. The improvement in economic and living standards across Asia, the strong demand for Australian-based education services from the Asian market as well as the continuing emergence of low cost carrier airlines will drive increased passenger demand into and out of Sydney. In addition, the city of Sydney is going through a major growth and rejuvenation phase, with large scale developments such as Barangaroo and the new Sydney Convention Centre expected to attract further inbound tourism growth.
The Sydney Airport 2020 and 2030 inflation linked bonds are currently offered at indicative yields to maturity of 5.22% and 5.95% respectively, assuming a 2.50% inflation rate.
Please contact your FIIG representative for further information and current pricing levels on the Sydney Airport bonds. Rates are accurate as at 18 February 2016 but subject to change. Available to retail and wholesale investors.