Why Auckland International Airport Ltd shares are flying today

Credit: Woodys Aeroimages

Fresh on the back of Sydney Airport Holdings Ltd (ASX: SYD) reporting a stellar full year performance yesterday, it was the turn of Auckland International Airport Ltd (ASX: AIA) today which reported a 25% jump in first-half profit due to increasing passenger numbers from rises in tourism.

Despite the fact the S&P/ASX 200 (Index: ^AXJO) is trading down 0.61%, Auckland International’s shares are up by a fantastic 6.5%, bringing its 12-month return to a whopping 30%.

The falling Australian and New Zealand dollars have been a great boost to tourism in the region. This, coupled with falling oil prices, will have gone some way to assisting with the strong growth the company reported in passenger numbers.

According to its report the total number of passenger movements was up 6.7% to 8.4 million. 4.3 million of these were international passengers, which was an increase of 7.2% year over year. This increase in passenger numbers helped boost revenue by 11.6% to $280.6 million, and allowed the company to raise its interim dividend up to 8.5 cents, from 7.08 cents last year.

The market is expecting earnings per share of 16 cents for the full year. By achieving earnings per share of 8.7 cents for the six months to December 31 2015, an 18.6% increase over the same period a year earlier, I feel the company is on course to beat analysts’ expectations.

I believe this will happen because with the New Zealand dollar and oil prices continuing to remain low, I would expect sustained increases in the level of passenger numbers. Especially with the rapidly growing level of Chinese tourism, and the establishment of direct access to all tier one Chinese cities through Air China.

Further bolstering growth in the future will be the entry of American Airlines and United Airlines. This is not expected to occur until mid-2016, so it may be the next fiscal year where the company sees any benefit to its top and bottom lines. Also, next month Emirates will begin to fly a direct service from Auckland to Dubai, making it the longest passenger route in the world at launch.

Increasing passenger numbers will be supported by an expansion to the international terminal. As well as allowing more passengers through comfortably, it will expand the airport’s retail footprint by 65%. Retail revenue grew 21 percent year over year, which bodes well for the future.

Foolish takeaway

Airports and airlines, such as Qantas Airways Limited (ASX: QAN), have had a great 12 months, and it seems as though all the stars are aligned for them at the moment. Spikes in oil prices or in the Australian and New Zealand dollars, could dampen tourism numbers. But until this happens I feel Auckland International and Sydney Airport make for great investments.

The Internet is About to Go "Six Feet Under"... And You CAN'T Afford to Miss What Comes Next

In-the-know investors are dancing on the Internet's grave--and gearing up to cash in on an even BIGGER tech industry. Australia--and the world--will NEVER be the same. Dollar for dollar, insiders are calling it one of the biggest new markets in the history of modern business... NOW is the time to get in on the hush-hush industry that could be poised for growth of over 4,463%+ by 2020... And the 1 ASX stock that stands to grow YOUR money right alongside it! Simply click here to learn its name.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.