Financial Analysis of Sydney Airport and Auckland Airport: Industry Overview, Stock Prices, and Ratios

finance
System04099

Contents
Executive Summary...............................................................................................................................2
Overview of the industry.......................................................................................................................2
Pestle analysis of the industry................................................................................................................3
Sydney Airport......................................................................................................................................4
Stock price movement.......................................................................................................................6
Sydney Airport..................................................................................................................................6
Auckland airport....................................................................................................................................7
Vision of the company.......................................................................................................................9
Stock price movement.......................................................................................................................9
SWOT Analysis...............................................................................................................................10
Financial analysis................................................................................................................................11
Operating efficiency........................................................................................................................11
Cash conversion cycle.....................................................................................................................11
Profitability ratio.............................................................................................................................13
Return on Assets..............................................................................................................................14
Return on equity..............................................................................................................................15
DuPont model......................................................................................................................................15
Comparison of both companies.......................................................................................................18
Retention ratio.................................................................................................................................18
Liquidity ratios................................................................................................................................19
Solvency ratios................................................................................................................................19
Interpretation.......................................................................................................................................20
References...........................................................................................................................................21
AUCKLAND AIRPORT.....................................................................................................................23
AUCKLAND AIRPORT.....................................................................................................................23

Executive Summary
This report will undertake the analysis of two companies named as Auckland airport and
Sydney Airport. This analysis is based on both qualitative and quantitative verdict. With the
quantitative data, the report uses the calculation of financial ratio in order to evaluate the
financial performance. This report will finally give an overview of where to invest or which
is the best-suited company for future investment. Both the companies operate in global
aviation industry. Apart from this, each company have used its own different business
strategies to achieve the market goals in the overseas market in order to achieve growth in the
sales (Sydney Airport, 2018).
Overview of the industry
The global airline industry provides service to each corner in the globe and plays an
important role in integrating several parts of the world and the economy. IATA predicts that
the industry will grow by averagely 3.7 % in regards to air passenger that differs from region
to region. It is estimated that there will be an increase in the number of air passengers in 2035
as compared to 2017 nearly 1.9 times. To view the industry with a more close view, it is seen
that 2019 will be marked as a fourth consecutive year of the sustainable profits. The
improvement in the net margin will be approximately 4.7 %. It has improved in the overall
revenue to nearly $824 billion. Rise in the overall passenger will be nearly 4.3 million
(Sydney Airport, 2015).

(Source: Airline industry, 2018)
Pestle analysis of the industry
Political- the political conditions of this industry is highly regulated by passengers. This is the
reason why global aviation operates in the location, which is distant from the residential area
as passenger safety, is paramount. Previous tendencies towards the monopolistic attitude in
the airlines might tighten the operations of the airlines. This industry is exposed to several
risks such as tighter regulation and the high competition has made some more amenities
compulsory.
Economic- the international airline industry is being affected by fluctuations in the rates of oil
as second Iraq world war had a subsequent hike in the oil prices before the great recession.
The last aspect of ongoing global economic slowdown has led that current struggling airlines
have to be contend with the reducing passenger traffic, high aviation fuel prices, soaring
maintenance, labour demands, and the operating cost. All the previous factors are prone to
bankruptcies as airlines cannot afford it in the profitability of the operation.
Social- the increasing millennial generation in the consumer base of the airlines reflects that
there has to be many modern changes made to the interior and ambience. Social changes of

the generation will be entitled to instant gratification and increasing demand of the services
that has resulted in the airlines in order to balance the cost with the increasing demand of
millennial generation. The passenger has changed with sufficient economic mind seats and
less business class people because they prefer to take advantage of the improved
communication so that they can conduct meeting rather than flying down just to meet the
business partners.
Technological- undoubtedly, airlines uses extensive technology in the operations. These are
limited to aircraft if the technological operation excludes the ticketing and distribution
aspects. This has encouraged several aspects to call to the airline so that they can make use of
advance in technology in the front office and also the customers facing functions as well.
Legal- huge number of lawsuits in regards to airlines from both workers and customers has
been increasing. The regulators are stricter for the airlines that means increasing mistrustful
of their business strategies have been leading to lawsuits. Increased regulations in regards to
“Double whammy” and their expensiveness lawsuit except the legal system that have become
intolerable issues, delays, and other aspects that has become fear for the airlines.
Environmental- while evaluating the climate changes, social consciousness have become
more significant as customers have started counting the carbon footprint that indicates that
customers are more conscious.
Sydney Airport
Sydney Airport is one of the busiest airports in Australia. This airport is also known as
kingsford smith airport that receives several travellers and tourist bound in Australia that host
regional, domestic, and international airlines. An average of 97400 passengers uses this place
every day. It is one of the world`s longest operating commercial airports that handles 348904
aircraft movements in 2017 (Sydney Airport, 2018). Airport`s terminal underwent two large

expansions that included additional high-rise office block, expansion of both domestic and
international terminals, and construction of multi-level car parking.
(Source: Sydney Airport, 2018)
Recently, the company has undertaken master plan, 2039 that outlines the strategic direction
for the development of Sydney Airport for the next 20 years. This Airport has a vital
infrastructure, which generates $ 38 billion from the economic activity for Australia and
NSW. At the same time, it generates employment of nearly 30900 jobs and 338500 full time
jobs. The key feature of Master plan is to accommodate the forecasted 51 % that will
increased the number of passengers to 65.6 million in the planning period (Sydney Airport,
2018).