Sydney Airport Holdings Ltd reports huge traffic growth

Credit: deeplimo

Sydney Airport Holdings Ltd (ASX: SYD) has released its April 2016 traffic report, which revealed excellent year-over-year growth for both domestic and international travellers.

Nearly 13.9 million passengers have transited through Sydney Airport’s doors so far this year – up 7.5% on the 12.9 million passengers recorded in the same period last year – with 3.43 million of those coming in April.

International arrivals were particularly strong, with growth actually increasing during the month compared to the year-to-date numbers. International travellers rose by 10.6% to 1.2 million during the month, compared to ‘just’ 10.1% growth year-to-date, while domestic travellers rose 5.2% to 2.23 million. That was slightly below the 6% growth in domestic passengers so far in 2016.

You can see these results in the chart below:

Source: Sydney Airport Holdings

Source: Sydney Airport Holdings

By comparison, international traffic grew 9.5% in January; 12.7% in February; and 7.9% in March.

The company said that the excellent performance was predominantly driven by strong increases from China, USA, Korean and Japanese nationals. Meanwhile, a weaker Australian dollar didn’t hold Australian nationals back from travelling to the USA, Indonesia, New Zealand, Hong Kong and China, which is a good sign for businesses such as travel agent Flight Centre Travel Group Ltd (ASX: FLT) and travel insurance provider Cover-More Group Ltd (ASX: CVO).

Notably, additional seat capacity also helped to boost passenger growth during the month.

The figures also show that the weaker Australian dollar is helping to boost inbound traffic numbers. Although it has risen since January, the AUD is still sitting around US 72 cents which makes it significantly cheaper for foreigners to holiday Down Under compared to this time last year (when the AUD was sitting at US 79 cents).

This should also provide a boost for other tourism-related businesses including Crown Resorts Ltd (ASX: CWN) and Mantra Group Ltd (ASX: MTR).

Although Sydney Airport is often overlooked as a quality blue-chip business, it does deserve the attention of long-term investors. The company carries a lot of debt on its balance sheet (it had $8.181 billion in long-term debt, compared to $366.8 million in cash as at 31 December 2015), but it also generates a tonne of cash and operates one of Australia’s most important pieces of infrastructure.

The company has also generated huge returns for shareholders over the years and still offers a compelling 3.5% dividend yield. Its shares aren’t ‘cheap’ but they could still be worth a closer look by long-term investors.

In case you're not so keen on Sydney Airport, however, there are plenty of other great blue chip businesses we think are still well-worth buying today.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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