Sydney Airport has the cash to sustain its operations through the coronavirus crisis for an extended period of time, its chairman says.
Trevor Gerber told shareholders at the company’s annual general meeting on Friday that he expects the airport to remain compliant with its debt covenants and doesn’t foresee the need to raise additional equity.
“We will however continue to reflect on our capital structure and test our assumptions as we work through the recovery phase,” he said at the virtual meeting.
Australia’s biggest airport has already raised $850 million more in bank debt to weather the coronavirus crisis, which Mr Gerber likened to two or three historical shocks rolled into one.
Sydney airport has $1.5 billion in debt maturing in 2020 and 2021, but its $2.7 billion in liquidity “will comfortably cover these maturities if necessary” as well as its operating costs for some time, Mr Gerber said.
Even in a “scorched earth” scenario in which the airport received no revenue through the end of next year, it could meet its financial obligations, executives said.
The airport’s operator said that in the first 18 days of May, its international traffic was down 97.9 per cent and domestic traffic down 97.4 per cent, compared to a year ago.
This follows a 97.5 per cent drop in overall traffic in April to just 92,000 passengers after government travel restrictions imposed to curb the spread of coronavirus.
The airport has cut its capital expenditure in half, to $150 million to $200 million for the 12 months to April, deferring some projects while taking advantage of the mostly dormant airport to remodel the duty-free area and some of the ageing baggage infrastructure.
Chief executive Geoff Culbert told shareholders the airport was actively working with government and industry leaders to resume flights back and forth to New Zealand.
The airport sees the “Trans-Tasman bubble” as a template for how the airport begins reconnecting to its worldwide network of 48 international airlines and 110 destinations, he said.
Each week that Australia’s international borders remain shut is costing the tourism industry and the economy close to $1 billion a week, as well as depriving the airport of 70 per cent of its passenger-derived revenue, Mr Culbert said.
“Unfortunately we don’t have a crystal ball that can tell you when domestic and international travel will start up,” he said.
At 1212 AEDT, Sydney Airport shares were up 1.8 per cent to $5.69.
Also on Friday, Royal Bank of Canada Capital Markets retained its outperform rating on the airport, with a $7 price target.
Analyst James Nevin wrote that RBC was optimistic about a resumption of domestic flights and trans-Tasman flights, perhaps as soon as July.
The risk of COVID-19 transmission in flight appears to be low, with just a handful of cases globally though to be have been acquired on planes, Mr Nevin wrote in a note.