The Sydney Airport
(ASX: SYD) share price has fallen around 2% after the business announced another update.
What is Sydney Airport?
This is the company that operates the Kingsford Smith Airport, it currently has a 99-year lease on the airport but it will revert back to government ownership at the end of this century. According to Sydney Airport, as of 2019, it generates around $31 billion in economic activity for Australia each year. That’s equivalent to more than 6% of the NSW economy.
What did Sydney Airport announce?
The company released its March 2020 passenger traffic numbers. Compared to last year, total passengers were down 45.1% to 2 million. Both domestic and international passengers were down over 40%.
However, for the first 16 days of April, provisional data shows a 96.1% decrease in international passenger traffic and a 97.4% decrease in domestic passenger traffic. Almost all passenger traffic has disappeared.
Sydney Airport expects similar reductions in traffic for so long as current restrictions on travel remain in place. The extent and duration of traffic will continue depending on the measures taken by governments.
Other matters
The business said it had secured an additional $850 million of bank debt facilities, strengthening its balance sheet.
Due to the importance of liquidity and the impact of COVID-19 on trading, the 2020 interim distribution has been cancelled.
Sydney Airport is maintaining strict expenditure measures including the reduction of director fees and CEO fixed remuneration by 20%. It’s targeting a 35% reduction in operating costs for the next 12 months.
In terms of capital spending, things have been deferred, rescoped or cancelled. However, it’s still looking at spending $150 million to $200 million over the next 12 months that are essential for safety, maintenance and asset resilience. It’s also thinking about non-critical projects that would take advantage of the fact that their airport is largely dormant.
Whilst interest rates are low, I think there is too much uncertainty to invest in a travel infrastructure business with a big balance sheet. I’d rather go for these technology shares instead:
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
