Australasian airports forecast to roll out $A7 billion in projects

May 08, 2018
$A7 billion airports projects
Photo: Brisbane Airport

Major Australasian airports are expected to roll out projects worth $A7 billion ($US5.26 billion)  over the next three to five years as they embark on “a capital speeding spree” to cater for buoyant demand, according to ratings agency Standard and Poor’s.

A new report by S&P Global Ratings predicts eight airports the agency rates will borrow $A5 billion to cater for international arrivals predicted to grow by about 5 percent in Australia and New Zealand over the next 18 months.

It expects this will leave the airports with $A25 billion in debt by June 30, 2021, as they spend on new runways, terminal facilities and other amenities to improve their service.

Three of Australia’s big four airports are in the process of either planning or constructing new runways.

The $A1.3 billion runway at Brisbane Airport is the first new runway to be built and is expected to be operational in 2020 but Melbourne and Perth are also planning projects and a new airport is being developed in Western Sydney.

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But airports will be able to delay or cancel parts of an expansion program if necessary, the report says.

It notes airports have a track record of proactively managing dividends or re-injecting capital through dividend reinvestment plans to cope with economic shocks or unseen events.

They are also likely to lock in tariffs over the phase of the capital works before starting their projects.

“We consider Australian and New Zealand airports will prudently manage their capital programs and financial profiles to maintain their credit quality,” S&P credit analyst Kendrew Fung said.

A report last year by rival Moody’s Investors services was also upbeat about the future of antipodean airports, saying international traffic was offsetting lackluster domestic demand to underpin the credit outlook for Australian facilities.

There are now some signs of domestic growth, although Australian airlines continue to keep a tight rein on capacity.

International Air Transport Association figures for March showed domestic traffic demand, as measured in revenue passenger kilometres, increased by 3.6 percent in March compared to the same month a year ago.

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And Qantas chief executive Alan Joyce told reporters during the airline’s third-quarter update that the domestic economy was ‘humming on cylinders” with leisure and corporate travel doing well and the resources sector showing signs of growth.

Disclosure: Steve Creedy is also a  contributor to The Airport Professional published by the Australian Airports Association.