After decades of juggling the 'hot potato' issue of a proposal for a second airport for Sydney, in 2013 the current Federal Government finally bit the bullet and made the decision that a second airport at Badgery's Creek would go ahead.
Had this asset gone to the highest bidder it could have spelt trouble for Sydney Airport Limited (ASX: SYD) which owns and operates the current (Kingsford-Smith) Sydney Airport. Luckily for shareholders the company purchased the right to first refusal back in 2002 and this means the group is sitting pretty and can weigh up its options over the best course of action to plot going forward. It's a very handy bargaining chip to hold!
A recent article in the Australian Financial Review which shone the spotlight on the Chief Executive Officer of Sydney Airport, Kerrie Mather, gave little away about how things may unfold. However, it would appear that initially a Badgery's Creek airport could be of a size which is on-par with Adelaide Airport.
With the company reporting solid full year results (it operates on a calendar year basis) back in February and with a decision on the second airport approaching, now could be a time to take a closer look at the company. Here are some key facts:
- Revenue grew 4.3% to $1.164 billion in 2014
- Earnings before interest, tax, depreciation and amortisation (EBITDA) was up 6.1% to $948 million
- Distributions increased 4.4% to 23.5 cents per share (cps)
- Passenger numbers expanded 1.7% to 38.5 million
- Real revenue per passenger continued to increase to over $30, while real operating expense per passenger remained below $6
- Management expects that a new airport could be operational by mid-2020 and its single runway is expected to serve approximately three million passengers on opening
More clarity on Sydney's second airport should be known by the middle of the year after which Sydney Airport has four to nine months to consider the government's proposal. For long-term investors, Badgery's Creek could offer a significant avenue of future growth for the group, in the meantime shareholders can expect to receive an increased distribution of 25 cps in 2015.
