Here’s how Sydney Airport Holdings Pty Ltd (ASX:SYD) is driving growth

Make no mistake, Sydney Airport Holdings Pty Ltd (ASX: SYD) is not a fast-growing company like Xero Limited (ASX: XRO) but that’s not stopping the country’s largest airport from thinking about ways to grow their business.

The company reported solid passenger growth again for August 2018 with international passengers leading the way at 4.7% monthly growth (compared to 3.3% for domestic passengers) and 5.1% year to date growth (compared to 2.1% for domestic passengers).

Sydney Airport’s CEO Geoff Culbert said, “Nationals from Indonesia (+16.5%), Japan (+11.6%) and India (+11.3%) recorded notably strong growth, with those from South Korea (+10.7%) also contributing to the overall performance”.

He also said, “overall international passenger growth was predominantly driven by the delivery of additional seat capacity”.

Over the half year ended 30 June 2018, Sydney Airport spent $180 million on capital projects aimed at increasing capacity including airfield and terminal works.

Even outside the company, there are major projects such as the Sydney Gateway led by Transurban Group (ASX: TCL) which is expected to ease traffic through to both domestic and international terminals at the Sydney airport.

In addition to capital expenditure, the company is also encouraging aviation authorities to liberalise air service agreements in order to allow airlines such as Qantas Airways Limited (ASX: QAN) and Virgin Australia Holdings Ltd (ASX: VAH) as well as other international carriers to increase their services flying into Sydney.

Whilst the growth prospects remain good, there are some risks that investors must keep in mind. A stronger Australian dollar and an increase in oil prices could make the costs of flying down under too prohibitive for some travellers.

Foolish Takeaway

Many income-focused investors will already like Sydney Airport for its monopoly business and high barriers to entry which keeps dividends flowing in. If it can continue to increase capacity and drive passenger growth, this company could be a dividend aristocrat that pays everlasting and growing income.

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can find Kevin on Twitter @KevinGandiya.

The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited and Transurban Group. The Motley Fool Australia owns shares of Xero. 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 Scott Phillips.

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