ASX: SYD’s Shares Zoom Up After the Release of Productivity Commission’s Draft Report

The Australian Government Productivity Commission has released its Productivity Commission’s Draft report today (6 February 2019) and in the report, the Productivity Commission has stated that the existing airport regulation benefits the community and remains fit for purpose.

Four airports namely Sydney, Melbourne, Brisbane and Perth were monitored by the Australian Competition and Consumer Commission in order to draft the report. As per the Productivity Commissions report, these airports have not systematically exercised their market power to the detriment of the community and each airport has generated sufficient returns to promote investment while not earning excessive profit. Post the release of the Productivity Commission’s Draft report, the share price of Sydney Airport (ASX: SYD) increased by 4.255 percent in the intraday trade. 

The report was generated to assess the current regime for airport regulation against the objective of promoting economically efficient operation of airports and related industries, to minimize compliance costs and facilitating commercially negotiated outcomes between airport operators and users. According to the report, although the Regulatory constraints at Sydney Airport are restricting the effect of aircraft noise on local residents, but it also impacting the airport efficiency. The commission is currently accessing other alternative options so that the Airport could meet their current noise objectives at a lower cost.

In the report, the Productivity Commission has noted that the Sydney Airport’s regional access arrangements are currently facilitating access for airlines which are flying to regional destinations. However, the Productivity Commission believes that the regime should be changed so that the airlines are allowed to use non-regional aircraft movement slots for regional as well as non-regional flights.

The Productivity Commission has also suggested that the airports should be required to separately report revenues and costs for their services in order to determine whether charges are due to the airport exercising its market power or due to the higher costs of providing international services. According to the Productivity Commission, the Government funding for infrastructure investments at regional airports should be subject to rigorous published assessment, and there is considerable scope to improve the financial management of airport assets at some regional airports.

As per the report, although most indicators of the monitored airports’ operational and financial performance are within reasonable bounds, the Productivity Commission has suggested that tailored reforms are needed to address specific areas of concern.

In 2018 December month, the International passenger traffic of the Sydney Airport increased by 3.7 percent to 1,611 as compared to the 1,553 passengers in 2017 December. Sydney Airport is going to release its full-year results on 21 February 2019. During the last 6 months, the share price of SYD decreased by 7.45% as on 5 February 2019. SYD’s shares traded at $6.860 with a market capitalization of circa $ 14.84 billion as on 6 February 2019. It has 52 weeks high of $7.620 and 52 weeks low of $6.240.


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