Sydney Airport (ASX: SYD)

Boost from International Traffic: Sydney Airport is said to be the top airport in the Australia/Pacific region as per customers who participated in one of the largest global customer satisfaction surveys. It was observed that the Passenger numbers have increased with a 2.6 per cent rise in the month of April over the prior corresponding period (pcp). Moreover, International traffic also grew by 1.8 per cent in the month of April and capacity also increased by 6.5 per cent which was offset by lower load factors that were impacted by the earlier Easter holiday period for 2018 compared to 2017. International traffic was benefited from strong growth in Taiwanese passengers as the number was up by 70 per cent for the month and more than 40 per cent year to date. An increase in frequency was observed that is to San Francisco, Manila and Osaka.


Top 10 Nationalities Travelling Through Sydney Airport (Source: Company Reports)

Recently, Singapore Airlines’ commenced its fifth daily service to Sydney. Overall, the addition is expected to deliver an incremental 79,000 seats per year, all of which are in the off-peak period. Whereas in March, the Group performed exceptionally well and reported a traffic growth of 11.1 per cent due to the holiday period. The Skytrax World Airport Awards assessed the customer service and facilities across 550 airports and its assessment was based on more than 13.7 million survey questionnaires that were completed by travellers of more than 100 nationalities. This kind of assessment undertaken will help the Group to improve its customer experiences. The share price was up by 85.83 per cent in last five years but started declining since the start of the year that is by 2.11 per cent. In last one month, the stock was up by 5.78 per cent, followed by a drop of 3.3 per cent in last five days. While tourism boom may benefit the stock, SYD still looks “Expensive” at the current market price of $7.02 given the trading levels.
 

Auckland International Airport Limited (ASX: AIA)

Strong capacity growth in Asia and the Middle East: The Group released its monthly traffic Report for March and reported an increase of 8.9 per cent in international passengers that amounted to 909,413 in March 2018. This increase was driven due to both the Easter holiday period starting in late-March this year, compared to mid-April in 2017 and due to strong capacity growth in the Asia and Middle East. Air New Zealand will launch a new three flights per week service between Auckland and Chicago which is expected to commence in November 2018 and will be providing more than 85,000 seats on the new route. Philippine Airlines recently announced that it will upgrade the aircraft used on its Auckland service from June 2018, which will in turn improve the overall route capacity by 22 per cent.


Passengers’ Movement in March 2018 (Source: Company Reports)

Lately, the Group received Commerce Commission’s draft report on the aeronautical prices set by the company for the period 1 July 2017 to 30 June 2022 (“PSE3”). The report supported PSE3 pricing decision, but it requested further evidence to support its target return. The Commerce Commission’s draft report reflected that Auckland Airport is investing heavily in new infrastructure in response to growth and that planned and actual investment is occurring at an appropriate time. It is expected that in the next five years, Auckland Airport’s average charges will reduce by 1.7 per cent per annum for international passengers and will increase by 0.8 per cent per annum for domestic passengers. The stock was up by 11.5 per cent in last six months and by 3.7 per cent in last one month. However, compared to its many peers, the stock seems to trade at higher levels and looks ‘Overvalued’ at the current price of $6.16.
 

Comparative Stock performance over last three months (Source: Thomson Reuters)

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