The Sydney Airport Holdings Ltd [ASX:SYD] share price is higher for the third consecutive day as confidence in the travel industry grows thanks to the vaccine rollout.
SYD today has released its 2020 full year results, pushing the SYD share price higher by 13 cents or 2.19% to $6.06 per share.
Its highest point since the end of January.
Yesterday SYD shares rose about 6%, signalling a returning confidence in the travel sector with the vaccine rollout beginning.
No more border closures signals clear skies for Sydney Airport
Delivering their annual report today, SYD CEO Geoff Culbert said state borders should stay permanently open after the most vulnerable Australians get the COVID-19 vaccine.
The airport delivered a $145.6 million annual loss after it suffered a 74.7% drop in passengers due to the pandemic to 11.2 million.
A stark contrast to the $403.9 million profit a year earlier.
SYD did not pay a final dividend and did not provide any dividend guidance for 2021 after passenger numbers tumbled during the pandemic.
But it said liquidity remained strong as it cut costs, with $1.1 billon of cash at the end of December and $2.4 billion in undrawn debt facilities after a $2 billion equity raising in August.
While far from great results, there appears to be a light at the end of the tunnel for Australia’s struggling travel industry.
CEO Geoff Culbert spoke on the airport’s outlook:
‘The recovery won’t be linear, but our experience shows that when restrictions are eased and borders come down, people are keen to travel. With the vaccine rolling out, we are cautiously optimistic that 2021 will see the industry begin to recover. We take great confidence from our financial and operational response to COVID-19, which puts us in a strong position to manage through to the recovery and make the most of it when it arrives.’
Not cleared for take-off yet
It’s easy to get overly cheery about SYD’s outlook, but things aren’t that simple I’m afraid.
Passenger traffic through the airport remained weak in January due to COVID-19 outbreaks over summer.
Total passenger numbers down 94% to 230,000 compared with the same month a year earlier.
Domestic traveller numbers were down 91% in January while international numbers were down 98%.
Which some of you might expect.
However, some analysts are worried that the airport could breach its debt covenants mid-year if domestic passenger numbers were to tumble as much as 70% in the second half of 2021.
But SYD, which is carrying $7.5 billion of net debt, said that it expected to continue complying with its covenants.
With $41.4 million provisioned for doubtful debts, including $13.8 million for money owed by airline Virgin Australia, SYD is still in a shaky position, in my opinion.
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