Q1 intl traffic growth offsets weak domestic demand at Sydney Airport

International traffic growth of over five per cent has offset flat domestic passenger numbers at Sydney Airport for the first quarter of 2017.

Figures released by Sydney Airport on Thursday show international passenger numbers through Australia’s busiest airport increased by 5.7 per cent in the first quarter compared to the first quarter of 2016, while domestic passenger numbers were essentially flat, growing by a scant 0.2 per cent.

“We are pleased that international passenger growth in the first quarter of 2017 has remained strong at 5.7 per cent versus the prior corresponding period,” Sydney Airport managing director and CEO Kerrie Mather said in a statement.

“In addition to the full year impact of services that commenced last year, over 620,000 annualised new international seats have already been announced in 2017. The additional services have been focused on Asia, with new and increased capacity to China, Vietnam, Korea, Indonesia and Hong Kong.”

For the month of March domestic passenger numbers did show modest growth, up 1.4 per cent on March 2016 (to 2,301,000), while international passenger numbers were up by 2.3 per cent (to 1,206,000), despite Easter falling in March in 2016 as opposed to April this year.

The airport also notes that domestic traffic in March “was also impacted by some service interruptions associated with Cyclone Debbie”.

 

Australian Aviation

Kerrie Mather to step down as Sydney Airport chief executive

Sydney Airport chief executive Kerrie Mather at AAA national conference.

Kerrie Mather has announced she is stepping down as chief executive of Sydney Airport.

Mather’s decision to leave the company she has led since 2002 comes as Sydney Airport considers whether to take up its right of first refusal to build and operate the proposed airport at Badgerys Creek in Sydney’s west.

The airport has until May 8 to inform the federal government of its decision.

Mather, who will stay on as chief executive until her successor is appointed, said in a statement on Wednesday Sydney Airport was well positioned for the future.

“I’m very proud of the work we’ve done in partnership with industry, governments and the community, to grow aviation connectivity and choice, domestically and internationally,” Mather said.

“It’s the right time to transition to new leadership. I look forward to continuing to work with the leadership team until the new CEO starts.”

The company said an international recruitment firm had commenced the search for a new chief executive.

Sydney Airport chairman Trevor Gerber said Mather had made a “tremendous contribution” in her time as chief executive.

“Under Kerrie’s leadership, Sydney Airport has developed strong and enduring relationships across the aviation industry, with all levels of government both in Australia and internationally, and with our local communities,” Gerber said.

“Sydney Airport is in a strong position, and well placed for future growth as Australia’s premier international gateway. We have a dedicated and talented leadership team in place that will ensure a seamless transition.

When the Commonwealth sold Sydney Airport in 2002 it included a 30-year right of first refusal to build and operate any airport within 100km of the existing terminals at Mascot.

In February, Mather said the government’s proposal represented a “challenging investment proposition” given the Commonwealth was not offering any funding assistance for the construction of the terminals and runways that are estimated to cost between $5-6 billion.

The Australian Competition and Consumer Commission (ACCC) said recently an independent or government-owned airport at Badgerys Creek would be a win for airlines and the passengers they carry.

“A second international airport competing with Sydney Airport could yield significant benefits to both consumers and airlines. An independent operator of Western Sydney Airport would have a strong incentive to invest, set competitive prices and offer improved service levels to effectively compete with Sydney Airport,” the ACCC said in its Airport Monitoring Report for 2015/16.

“On the other hand, a common owner of the two airports would have an incentive to restrict investment and delay the new airport in order to maximise returns from its existing assets.”

The federal government has said it was prepared to build the airport itself should Sydney Airport not exercise its right of first refusal.

 

Australian Aviation

Sydney Airport to decide on Badgerys Creek by May

The federal government has officially "declared" Badgerys Creek as the site for a second airport in Sydney. (Jordan Chong)

Sydney Airport says it plans to have a decision on whether to take up its right to build and operate the proposed airport at Badgerys Creek by early May.

In December, the federal government issued Sydney Airport a Notice of Intention (NOI), effectively a sales contract, that outlined the formal contractual terms for the project.

At the time, the government gave Sydney Airport four months to consider the offer, with the deadline on making a decision set for May 8.

While Sydney Airport has objected to the four-month deadline and continues to argue it should have nine months to consider the NOI, the company said on Thursday it would work towards the May 8 timetable.

“We remain of the view that we are entitled to a nine-month consideration period but will be endeavouring to meet the Commonwealth’s timetable,” Sydney Airport chief executive Kerrie Mather said during the company’s calendar 2016 full year results presentation.

“As soon as we have adequate information to make an informed decision, we will do so.”

The company booked $21 million in expenses, including $16 million in external costs, in its calendar 2016 accounts towards the proposed Badgerys Creek Airport.

“We are continuing to adopt our rigorous approach to the evaluation process, applying our disciplined investment criteria including consideration of rates of return, cash flow, growth potential, downside protections and the impact on Sydney Airport,” Mather said.

“Confidential and detailed market soundings with the contractor market are in progress to further inform our view of the construction costs.”

Mather reiterated the airport company’s view that Badgerys Creek would be a challenging investment proposition, given the NOI said Sydney Airport would be responsible for all of the costs of building and operating the airport.

“Given the significant challenges the project will face, Sydney Airport has consistently expressed its opinion that the Western Sydney Airport project would require material support from the Commonwealth to make it commercially viable,” Mather said.

“However, the Commonwealth delivered a NOI that does not feature any material support including previously contemplated procurement protections or Commonwealth funding which makes WSA a challenging investment proposition.”

The government said in December there would be no direct financial support from the Commonwealth towards building and operating the proposed airport at Badgerys Creek. The cost of construction was estimated to be between $5 billion and $6 billion.

When the Commonwealth sold Sydney Airport in 2002 it included a 30-year first right of refusal to build and operate any airport within 100km of the existing terminals at Mascot.

Minister for Urban Infrastructure Paul Fletcher said in December the government could choose to build and operate the airport itself or offer the opportunity to private sector companies should Sydney Airport decide not to exercise the right of first refusal.

The final Western Sydney Airport Plan showed Stage 1 of the airport would feature a terminal capable of handling up to 10 million domestic and international passengers a year, with a single 3,700m long by 60m wide runway on a 05/23 orientation.

The design of the facility would allow for a second parallel runway and expansion of the terminals to cater for 37 million passengers a year by 2050 and 82 million a year by about 2063.

The terminal design would feature swing gates capable of handling both domestic and international flights, which would increase the efficiency of transfers and increase the use of contact gates equipped with aerobridges.

Meanwhile, jet fuel supply was expected to be delivered by road tanker in a similar way to other airports operating on this scale, such as Canberra and Gold Coast airports.

And the Airport Plan said flightpaths had not been finalised, noting the draft flightpaths shown in the draft Airport Plan were a “conceptual model for aircraft arrivals”.

On the financial results, Sydney Airport reported net profit for the 12 months to December 31 2016 of $320.9 million, up 13.4 per cent from $283 million in the prior corresponding period.

Total revenue was 11 per cent higher at $1.365 billion, the airport said in a regulatory filing to the Australian Securities Exchange on Thursday.

Aeronautical charges, which made up 45 per cent of the airport’s total revenue and comprise payments from airport users for terminal and airfield infrastructure use, rose 17.4 per cent to $614.2 million.

Revenue per passenger increased 5.2 per cent in calendar 2016 to $32.60 per passenger, compared with $31 per passenger in the prior corresponding period.

Sydney Airport declared a final distribution of 16 cents per stapled security, bringing total distributions for calendar 2016 to 31 cents per stapled security. The company has guided the market to an increase in distributions to 33.5 cents per stapled security for calendar 2017.

Passenger numbers through its domestic and international terminals were up 5.6 per cent at 41.9 million.

“We are committed to maintaining a disciplined and focused approach to delivery on our strategy, which is positioning Sydney Airport well for future success,” Mather said in a statement accompanying the financial results.

“Our confidence in the outlook for the business supports the guidance for a distribution increase in 2017.”

 

Australian Aviation

Sydney Airport exceeds 41 million passengers in 2016

Sydney Airport topped 41 million passengers in calendar 2016, led by growth in international travellers.

The airport handled 41.87 million passengers in the 12 months to December 31 2016, up 5.6 per cent from 39.656 million in the prior year.

The number of international passengers rose 8.9 per cent to 14.94 million, Sydney Airport said on Friday. The company said it was the fastest pace of international growth in 12 years.

“We’re proud to have worked with our airline and tourism partners to support aviation and tourism growth in Sydney and NSW, adding almost 2.5 million incremental seats in 2016,” Sydney Airport chief executive Kerrie Mather said in a statement.

Meanwhile, Sydney Airport handled 26.929 million domestic passengers in calendar 2016, an increase of 3.8 per cent from the prior corresponding period.

 

Australian Aviation

Clock starts ticking on Sydney Airport’s Badgerys Creek decision

The federal government has officially "declared" Badgerys Creek as the site for a second airport in Sydney. (Jordan Chong)

Sydney Airport has been given four months to decide if it wishes to build and operate the proposed airport at Badgerys Creek.

The federal government on Tuesday issued Sydney Airport with a Notice of Intention (NOI), effectively a sales contract, that outlines the formal contractual terms for the project.

When the Commonwealth sold Sydney Airport in 2002 it included a 30-year first right of refusal to build and operate any airport within 100km of the existing terminals at Mascot.

While it is understood the government could have offered between four and nine months for Sydney Airport to consider the NOI, Minister for Urban Infrastructure Paul Fletcher said it opted for four months given the extent to which the two parties worked on the document together.

“The Commonwealth considers that the consultation process has allowed Sydney Airport Group to become substantially familiar with the terms of the Notice of Intention, meaning that under the terms of the Right of First Refusal it has four months in which to accept the Notice of Intention,” the Minister said in a statement on Tuesday.

The NOI period would expire in mid-May, Fletcher told reporters in Sydney.

The issuing of the NOI followed publication of the final Western Sydney Airport Plan on December 12, which showed Stage 1 of the airport would feature a terminal capable of handling up to 10 million passengers a year, with domestic and international flights operating on a single 3,700m long by 60m wide runway in a 05/23 orientation.

The design of the facility would allow for a second parallel runway and expansion of the terminals to cater for 37 million passengers a year by 2050 and 82 million a year by about 2063.

The terminal design would feature swing gates capable of handling both domestic and international flights, which would increase the efficiency of transfers and increase the use of contact gates equipped with aerobridges.

Meanwhile, jet fuel supply was expected to be delivered by road tanker in a similar way to other airports operating on this scale, such as Canberra and Gold Coast airports.

And the Airport Plan said the flightpaths have not been finalised, noting the draft flight paths shown in the draft Airport Plan were a “conceptual model for aircraft arrivals”.

In November, Federal Minister for the Environment and Energy Josh Frydenberg laid down 40 environmental conditions that needed to be met as part of the construction and operation of the proposed airport. They covered biodiversity, noise and heritage and were developed after a review of the proposed airport’s environmental impact statement (EIS) that was finalised in September.

Fletcher said the timetable contained in the NOI was for earth moving works to start by late 2018 and airport operations to commence by 2026.

“I am confident that the terms the Commonwealth has put to Sydney Airport Group are in the public interest with a view to securing a high quality airport in the required time frame,” Fletcher said.

Sydney Airport said in a statement it would seek more time beyond the four months, which it described as a “limited time allowed” to consider the NOI.

“Sydney Airport believes it is entitled to a nine-month consideration period and is continuing to discuss this with the Commonwealth,” the airport said.

“The length of this period will have no impact on the announced opening date for the airport.”

The company also described the proposed Badgerys Creek airport as a “challenging investment proposition” given the level of government funding committed to the project.

In its statement to the Australian Securities Exchange, Sydney Airport said the two-year consultation period considered different scenarios for how the airport’s construction would be funded.

During the first 12 months, the consultations were based on the idea the federal government would pay for site preparatory works while Sydney Airport paid for the aviation infrastructure work, Sydney Airport said.

In the second 12 months, the funding model considered involved a long-term Commonwealth loan for a “significant part” of the airport’s development costs and a “multi-year procurement process at the end of which Sydney Airport would have the right to withdraw from the project if costs were materially greater than anticipated at the date of the NOI”.

However, Minister Fletcher’s statement noted: “All of the costs of building and operating the airport would be met by Sydney Airport Group in return for all of the economic benefits of ownership of the airport over 99 years.”

Fletcher later told reporters in Sydney: “There is no financial support, no direct financial support, from the Commonwealth provided towards the cost of building and operating Western Sydney Airport under the contract, the proposed contract set out in the Notice of Intention.”

The cost of construction was estimated to be between $5 billion and $6 billion.

On the level of government funding committed to the project under the NOI Sydney Airport said: “Given the significant challenges the project will face, Sydney Airport has consistently stated that the project would require material support from the Commonwealth to make it commercially viable.”

“Whilst Sydney Airport accepts that the Commonwealth has ultimately exercised its right to deliver a NOI that does not feature these procurement protections or any Commonwealth funding, the Commonwealth’s recent change in approach makes the Western Sydney Airport a challenging investment proposition.”

Sydney Airport chief executive Kerrie Mather said the challenges facing the development of a greenfield airport could not be underestimated.

“Project risks include procurement and construction risks over the approximately 10-year period before the airport opens, and operational, traffic, financing and political risks, which are at their peak in the initial years of the airport lease,” Mather said.

“Our job now, on behalf of our investors, is to evaluate the opportunity taking a rigorous approach and applying our disciplined investment criteria including consideration of rates of return, cash flow, growth potential, downside protections and the impact on Sydney (Kingsford Smith) Airport (KSA). Once that evaluation is complete the Board of Sydney Airport will determine whether it is in the best interests of investors to exercise the option.”

Fletcher said the government could choose to build and operate the airport itself or offer the opportunity to private sector companies should Sydney Airport decide not to exercise the right of first refusal.

 

Australian Aviation