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Weak passenger growth trends for airports

Sydney airport is Australia’s largest airport and releases monthly data on passenger and aircraft movements. This provides a near real time window into the health of the Australian airports sector more generally. Sydney Airport’s year to May 2019 numbers show a small fall in total passenger numbers. Domestic passengers are the key driver, with numbers down 1.4% on year to date basis, which compares to the 10 year trend of 2%.

Table 1: Sydney airport passenger data – May 2019

Domestic passenger numbers in Australia peaked in August 2018 and have dipped ever since. The last time domestic passenger numbers fell was in 2014 to 2015 when there were global fears of a slowdown in the Chinese economy (which have resurfaced again with ongoing trade tension).

Chart 1: Domestic passengers - Australia

Looking at Australia more broadly, domestic seat capacity has flatlined since 2013 when Qantas and Virgin ended their capacity and price war. Available seats have been stagnant since 2013 with load factors increasing over the period.

Chart 3: Domestic passengers – Australia rolling 12 months

Domestic airfares have trended upwards over the period. Flexible economy fares – typically preferred by business travellers - spiked in late 2017 (Chart 4). The cheapest economy fares have been tracking upwards with a seasonal peak during the summer holidays and a lull in winter (Chart 5).

Chart 4: Domestic airfares – Flexible tickets

Chart 5: Domestic airfares – lowest cost ticket

On the international passenger side, the 10 year passenger average growth rate is circa 5%. Sydney airport is reporting 2% year to date passenger growth for May 2019 which suggests there has been a slowdown in international passengers this year. From an outbound passenger perspective – this reflects the low Australian dollar as well as weaker consumption spending patterns in Australia (which are in turn linked to house prices). From an inbound perspective, the weakness may reflect the impact of trade tensions (and tighter restrictions on foreign currency purchases for Chinese travellers) but it hard to get definitive data on this at the moment.

Chart 6: Annual international passenger growth – Australia

Airports have proven to be resilient infrastructure assets over the long-term. Passenger volume growth rates move with the economic/competition cycle. While periods of below trend growth do occur (… roughly half the time) history provides confidence that these periods are reasonably short-lived and number/growth rates return to the long-term trend over time.


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