Sydney Airport chief executive Geoff Culbert says further liberalisation of Australia’s air services agreements would help unlock new passenger flows and stimulate air travel.
At the company’s results presentation for the first half of calendar 2018 on Wednesday, Culbert cited the example of Nepal, which he noted was Australia’s third-largest source of foreign students after China and India.
Further, Kathmandu was currently Sydney’s largest unserved market globally, with 93,000 people travelling to and from the Nepal capital to Sydney a year.
“But they are flying via somewhere else,” Culbert said.
“This means we could fill a five-day-a-week service straight away. With the stimulatory effect of a direct flight we would expect a daily service between Kathmandu and Sydney to be no problem.”
Culbert said Nepal Airlines had expressed interest in serving Australia nonstop from Kathmandu and with Airbus A330-200s in the fleet had suitable aircraft for the route. (Sydney-Kathmandu is 5,253nm).
However, there is currently no air services agreement between Australia and Nepal.
“We are working on that and it is a good example of the work that we are doing to expand the core in our aviation business,” Culbert said.
Currently, the markets of Fiji, Hong Kong and Qatar are constrained in terms of capacity to and from Australia’s four major gateways of Brisbane, Melbourne, Perth and Sydney under existing air services agreements with Australia.
In the case of Hong Kong and Qatar, airlines from those two countries are unable to add additional frequencies to or from Australia’s four major gateways. Instead, the only way to grow capacity is to utilise larger aircraft, which is what Cahtay Pacific has been doing.
There is still available capacity for Australian carriers to launch services to Qatar or expand their existing schedule to Hong Kong.
In the case of Fiji, the bilateral is all but maxed out, with both sides using the 6,500 available seats for both Australian and Fiji flag carriers.
In March, aviation consultancy CAPA – Centre for Aviation’s Blue Swan Daily website said in a research note Fiji Airways was fully using its capacity entitlements to Australia during peak periods.
Meanwhile, capacity entitlements for Australian carriers were expected to be fully used by the end of 2018 following planned expansion from Jetstar and Virgin Australia.
Culbert said there was ongoing dialogue between the airport and government on air services agreements.
“We have a good relationship with the government where we explain to them where we think we are starting to bang up against the limits of existing air services agreements or where we think new air services agreements could unlock new demand,” Culbert said.
“And so that’s an ongoing conversation. We don’t just talk about Nepal, there is a variety of other regions that we will talk to them about from time to time.”
Sydney Airport profit up four per cent in first half of calendar 2018
In terms of the financial results, Sydney Airport reported net profit of $174 million for the six months to June 30 2018, up four per cent from $167 million in the prior corresponding period.
Revenue rose 7.9 per cent to $770.8 million, Sydney Airport said in a regulatory filing to the Australian Securities Exchange (ASX).
Culbert said it was a strong result.
“This result reflects our targeted marketing strategy, our partnerships with government and industry, ongoing benefits from the liberalisation of air rights, prudent investment in capacity and favourable global tourism and travel trends,” he said in a statement.
Aeronautical charges, which made up more than half of the airport’s total revenue and comprised payments from airport users for terminal and airfield infrastructure use, rose 7.6 per cent to $345 million.
Retail turnover rose 8.9 per cent to $177.1 million, while car parking and ground transport revenue grew 2.1 per cent to $78.6 million.
Finally, property and car rental revenue was up 10.9 per cent to $118.2 million.
Passenger numbers up 3.3 per cent
The airport handled 21.6 million passengers in the first half of calendar 2018, an increase of 3.3 per cent from the prior corresponding period.
The number of international passengers rose 5.2 per cent to 8.1 million, while domestic passengers increased by a more moderate 2.1 per cent to 13.5 million.
Looking ahead, Sydney Airport chief financial officer Geoff Botham said schedules filed so far for the Northern Winter season suggested international seat capacity growth of between four and six per cent in the second half of calendar 2018.
Sydney Airport said total aircraft movements in the 2018 first half was flat at 170,702, which was broadly unchanged from the prior corresponding period.
Further, it said 35 per cent of its slots were currently unused.
Culbert said Sydney Airport had available slot capacity both in peak, which it defined as between 0600 and 1200, and off-peak periods.
“Once again we have been able to grow passengers while movements have remained flat,” Culbert said
“The drivers of this are the usual suspects – increased capacity and some upgauging.”
Sydney Airport said 61 per cent of new seats added during the 2018 first half – such as Qatar Airways’ Sydney-Doha depature, Emirates’ fourth Sydney-Dubai rotation and Singapore Airlines’ evening flight to Singapore, via Canberra – were in the off-peak periods.
New peak-time flights included United’s Sydney-Houston nonstop flight, Tianjin Airlines’ flight to Zhengzhou and Hainan Airlines’ Haikou route.
Sydney Airport said 49 per cent of its available slots were used for domestic flights, with 16 per cent for international services. Some 35 per cent of slots were unused.
“We can accomodate growth in the peak and we have some really good additions in the first half,” Culbert said.
Sydney Airport chief financial officer Geoff Botham said schedules filed so far for the Northern Winter season suggested international seat capacity growth of between four and six per cent in the second half of calendar 2018.
In terms of infrastructure improvements, Culbert said there was some consideration to add extra gates at the international terminal’s Pier A and expanding the remote stands at the apron.
Sydney Airport reaffirmed previous guidance of between $1.2 billion and $1.5 billion of capital expenditure over the three years to 2021.
Sydney Airport signs renewable energy deal
Separately, Sydney Airport says it will source 75 per cent of its current electricity load from wind power after signing a Memorandum of Understanding (MoU) with Origin Energy and Grassroots Renewable Energy.
The electricity will be supplied by Grassroots Renewable Energy’s Crudine Ridge Wind Farm, located near Mudgee in the NSW Central West.
The wind farm is expected to have 37 wind turbines and 135 megawatts capacity by the time construction, which started earlier in 2018, is completed in late 2019. This was capable of generating 400,000 megawatt hours a year.
Origin Energy will provide caseload power when the wind farm was not generating enough energy to meet the airport’s needs.
Grassroots Renewable Energy is a partnership between Partners Group and CWP Renewables.
Origin Energy said the MoU with Sydney Airport followed an agreement to provide firming generation for the University of NSW that complimented its use of renewable energy from Sunraysia Solar Farm.
Further it was an area of growing interest from customers who wanted “more sustainable energy combined with the assurance of firming energy and expert portfolio management”.
“Renewable energy in Australia is rapidly growing in scale and Origin is enabling our customers to source energy with direct line of sight to wind and solar facilities,” Origin Energy executive general manager energy supply and operations Greg Jarvis said in a statement.
“Origin is proud to be helping our customers develop energy procurement strategies to enhance their sustainability aspirations.”