Sydney Airport drives rise in earnings

Australia’s largest airport owner, Sydney Airport (ASX:SYD) has reported a 7% rise in revenues to $538 million for the first six months of 2013.

Earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 6%, with passenger growth rising just 3%. Strong demand for travel out of China and the US was the primary driver, but the company also reported growth of 5.3% in retail revenues, 9.4% growth in property and car rental revenues, while car parking and ground transport revenues surged by 11.5%.

Despite the offers of significant discounts and special offers online, Sydney Airport is still an expensive place to park your car. A further 900 parking spaces will open near the domestic terminal, in time for the Christmas peak.

For shareholders concerned about the dividend, the company declared a distribution of 11 cents per security, the same amount as last year, with full year guidance reaffirmed at 22.5 cents.

Sydney Airport announced last week that it was acquiring the remaining 15.2% of the airport it didn’t already own, as well as moving to simplify the corporate structure. Purchase of the minority holding will also result in the foreign-ownership cap rising from 40% to 49%.

Qantas Airways (ASX:QAN) announced in May this year that it had had discussions with Sydney Airport to sell its Terminal 3 long-term lease, which is due to expire in 2019. Qantas also recently moved its regional subsidiary airline, QantasLink into Terminal 3, saving around 1 million passengers a year the frustration of having to switch terminals.

Like Auckland International Airport (ASX:AIA), Sydney Airport benefits from being a monopoly, and can virtually charge whatever it wants for the use of its facilities. The biggest threat to an airport monopoly is of course another airport. With much talk around building a second airport going on, Sydney Airport holds the right of first refusal to build, own and operate a second airport, but the company is not keen on splitting its interests.

Foolish takeaway

Talk about a second Sydney airport has been going on for 30 years, with no decision being made. It’s unlikely that we’ll see a decision on it anytime soon, leaving Sydney Airport to continue on its merry way for some time.

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Motley Fool writer/analyst Mike King owns shares in Sydney Airport.

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