The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price will be in the spotlight today after management posted its latest traffic figures, although this isn’t the only reason why the stock will be scrutinised.
Our nation’s largest airport reported a 1.3% increase in the number of domestic passengers going through its terminals in December. But international passenger numbers continue to fall and there are reasons to think this trend could continue.
International traffic falls in December
International visitors dipped 0.4% to 1.6 million in the last month of calendar 2019 despite a rebound in the number of passengers from China.
However, the drop wasn’t enough to stop the airport from posting an increase in total international passenger numbers for 2019. This increased 1.1% to 16.9 million.
The opposite is also true for domestic travellers. While this category is trending up, the total number dipped 0.5% to 27.5 million for the year.
Bushfires a new threat
But traffic performance isn’t the main thing investors should be watching, in my view. There are media reports that tourists, especially those from the US, are cancelling their holidays down under due to the devastating bushfires.
This is significant for Sydney Airport as the operator is counting on US visitors to offset falling numbers from other key countries.
“When you look at the different nationalities coming through the airport, the growth we’ve had in a number of key markets like the US and India has helped offset the slowdown from places like the UK throughout 2019,” said its CEO Geoff Culbert.
SARS part deux?
This isn’t the only worry. While traffic from China increased by a respectable 5.4% in the last month of 2019, an outbreak of a mysterious virus linked to the deadly Severe Acute Respiratory Syndrome (SARS) virus could pose a threat.
China reported 17 new cases of this new virus on Sunday, according to Aljazeera. Two patients have died while another three are believed to be in severe condition.
The SARS outbreak in 2002 claimed nearly 800 lives as it spread across 24 countries. It also brought the global aviation industry to its knees.
There is no reason to panic at the moment. This new outbreak doesn’t seem to be as deadly and authorities around the world have a tried and tested response plan this time round.
Nonetheless, if the new virus were to rapidly spread, the earnings of Sydney Airport and airlines like Qantas Airways Limited (ASX: QAN) could take a hit.
There’s quite a bit of room for the Sydney Airport share price to retrace. It’s gained 41% over the past 12-months when the Qantas share price increased 18% and the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index jumped 20%.
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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.