Sydney and Auckland Airports Could Face Travel Resumption Delays, but FVEs Not Materially Impacted

Uncertainty in the timing of a passenger rebound at Auckland and Sydney Airports continues to hang over the companies. Recent commentary from Qantas and government officials suggests international traffic to and from Australia (and by proxy, New Zealand) may not resume until June 2021. We're more optimistic, estimating a ramp up starting in late calendar 2020 based on potential travel “bubbles” like the proposed trans-Tasman route, further supported by a likely COVID-19 vaccine in first-half 2021. However, the exact timing of the recovery is less important to our valuation than the certainty of the eventual return. We continue to expect both airports will benefit from rising international tourism over the long term, and maintain our estimated AUD 6.80 fair value for narrow-moat Sydney and NZD 6.65 (AUD 6.20) fair value for wide-moat Auckland Airport.