Touring Lions fans bolster airport passenger numbers

Chinese visitors and fans of the British and Irish Lions rugby team bolstered traffic at Sydney and Melbourne airports last month, helping to allay fears of a looming slowdown in passenger growth.

With Qantas and Virgin Australia reducing their rate of capacity growth in the domestic market, investors were concerned it would adversely affect the number of passengers who pass through the country's main airports.

But the latest figures from Sydney and Melbourne airports, the two largest, show that while growth in passengers is easing, it remains relatively strong.

Importantly for the airports, international passenger growth is still strongest. Sydney reported a 3.6 per cent rise in foreign visitors last month, compared with the same month last year, and Melbourne 8 per cent.

International passengers are more than twice as valuable to airports as domestic passengers because they stay longer and spend more in duty-free shops. They also pay more in airport charges.

Andrew Chambers, a research analyst for fund manager Legg Mason, said some investors had been concerned about the likelihood of a significant slowdown in passenger growth due to Australian airlines easing their capacity growth on domestic routes.

"It has slowed a fraction but it is particularly resilient given what is going on in some other sectors," he said.

Domestic passengers rose by 2.4 per cent at both Sydney and Melbourne last month.

A weaker dollar has also not deterred Australians from travelling overseas en masse. Sydney Airport reported a rise of almost 3 per cent in the number of Australians who passed through the international terminal last month.

Conversely, a weaker dollar is likely to help boost the number of foreign travellers over the coming months.

Sydney Airport reported a 13 per cent surge in British visitors last month due in part to fans following the British and Irish Lions rugby team on their tour of Australia, while Chinese tourists rose 12 per cent.

"The Asian growth story is still there," Mr Chambers said.

The airports are benefiting from airlines including Singapore Airlines and China Southern increasing capacity on international routes to Australia as they look to tap what is regarded as a resilient economy. Next month Air India will begin direct services from the subcontinent to Sydney and Melbourne. However, Macquarie Equities analysts have cautioned that the airports face a "tougher growth environment" due to airlines reducing their rate of capacity growth.