Sydney Airport keeps growing passenger numbers

The business has provided an average annual return of 13% since listing in 2002.

Sydney Airport (ASX: SYD) reported strong international passenger growth in August, increasing 5.6% on 2012’s numbers.

Tourism also got a boost when the first ever Boeing Dreamliner flight touched-down direct from Delhi. India has significant growth potential and was Sydney’s largest unserved market until then. After encountering a number of problems since entering service, the Dreamliner’s arrival was welcomed in Sydney. Said to be the first of a new generation of aircraft, a number of the latest 787-9 models are to be delivered to Air New Zealand (ASX: AIZ) in 2014.

Larger aircraft have the potential to be more profitable for all airlines and have already transformed airport usage. Sydney Airport reporting that since 2000, passenger numbers have increased by 46%, while actual take-offs and landings have only increased 3%.

In terms of international passenger traffic, the fastest growing market is Malaysia, and Malaysian Airlines is to commence a third daily service in February 2014. That will provide an additional 207,000 seats per year.

For the first six-months of 2013 the group reported a rise in revenues to $538 million, up 6.8% on the corresponding period. In the year-to-date total passenger numbers travelling through the airport are up 3.1%.

Foolish takeaway 

A relatively low-risk business model combined with resilient cash flows have seen investors well rewarded in recent times. Passenger numbers are leveraged to economic cycles, but Sydney Airport still looks a solid long-term investment.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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