Is the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price a buy right now?
The airport operator has already given us an insight into how air passenger numbers are going. In the first 16 days of April international traffic was down 96.1% and domestic passenger traffic was down 97.4%.
This would obviously be bad news if that continued for beyond the foreseeable future. Firstly, don't forget that cargo is still being shipped, so it's not like airports are completely devoid of activity.
But there are two promising things for the Sydney Airport share price since that last update. The first is that Australia has done a very good job of limiting the spread of the coronavirus. Some states like South Australia aren't seeing any new cases. If the entire country can get into a position where air travel can return, then domestic passengers could return sooner than expected.
The second good thing is that there's now talk of creating a bubble of Australia and New Zealand. In January 2020, Kiwi passengers were the third biggest group of people travelling through Sydney Airport (behind only Australians and Chinese). If New Zealand passengers could return for work and tourism then that would be a great boost.
Don't get me wrong, there's a long way to go before Australia would be comfortable linking up with other countries. Perhaps somewhere like South Korea would logically be the next country after New Zealand.
Is the Sydney Airport share price a buy?
The company seems to have the financial liquidity to survive through this difficult period.
Sydney Airport shouldn't be valued on just the next year of earnings. What does 2021 and beyond look like? Will enough potential passengers feel brave enough fly again? Will travel restrictions with the USA, Asia and Europe be lifted? That's the question.
If a decent amount of travel can come back in the medium-term then Sydney Airport may well be cheap at this price considering how low interest rates are. And also based on how long the interest rate will stay low.
I'm not personally looking to buy Sydney Airport shares. But it's looking promising with how things are progressing in Australia (and New Zealand).
