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Sydney Airport share price falls on stagnant December traffic growth

Sydney Airport Holdings Pty Ltd’s (ASX: SYD) share price has dropped 2.2% this morning after releasing its traffic performance results for December and the 2018 calendar year.

December 2018 saw a 0.1% decline in total traffic on the previous corresponding period, while full-year traffic was up 2.5% on 2017.

The December result was due to a 2.6% decline in domestic traffic compared to December 2017. This was partially offset by 3.7% international traffic growth. Domestic travel comprises 62% of total traffic for Sydney Airport.

The full-year result was more positive, with 1.2% and 4.7% growth in domestic and international traffic, respectively.

Sydney Airport CEO, Geoff Culbert said, “2018 was another record year for Sydney Airport with 4.4 million passengers travelling through our three terminals, an increase of 2.5% compared to 2017.”

International travel continues to be the airport’s primary source of growth, driven by increased international seat capacity of 1.2 million additional seats last year. International travel is more profitable for the airport due to higher fees.

India continues to prove itself as a deep pocket of growth, with a 13.8% increase in traffic from Indian nationals in 2018. India is a 1.3 billion person market, or one-sixth of the world’s population. They are one of the fastest growing aviation markets in the world, driven by a rapidly growing middle class.

Why Sydney Airport shares are down

The market’s mildly negative reaction represents disappointment in lagging growth for December. This will likely only fuel concerns regarding a slowdown in crucial international traffic growth.

The results come shortly after research from UBS pointed to a potential crimp in the Chinese market, attributed to an economic slowdown relating to the Sino-US trade war.

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Returns as of 6th October 2020

Motley Fool contributor Cale Kalinowski has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. 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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