The team at Unconventional Wisdom were invited for a tour of Melbourne Airport. You’re probably thinking, “Why Melbourne Airport?” The simple reason is that an airport can generate high returns compared to other major infrastructure investments and they are relatively low risk. While AMP is the major stakeholder in Melbourne Airport, the Future Fund, and IFM Investors both hold significant stakes as well. Australia’s Future Fund is well known for beating the benchmark time and time again, so there is no harm in piggybacking its investments. Whether you’re boarding a plane for your vacation or dropping off a friend, the airport experience is familiar to everyone. Airports are an essential component of infrastructure to most modern cities. Their growth is driven by the tourism, population growth and the expansion of the middle class combined with the declining cost of air travel. As commercial airline travel has become a common form of transportation, they have become essential assets to cities. Melbourne Airport also enjoys a monopoly position and is the only international airport in the state. Its primary revenue driver is aeronautical revenue but it also generates substantial revenue from non-aeronautical revenues such as retail, parking, hotels, business parks and property development. So it makes sense to have some exposure to an airport in your portfolio. Melbourne is the primary airport serving Melbourne, and the second busiest airport in Australia after Sydney Airport. It was opened in 1970 ending nearby Essendon airport’s near two decade run as Melbourne’s international airport. Essendon facilities were insufficient to meet the increasing demand for air travel and today its facilities are used for commercial, corporate jet and charter services. In the first year of operations, Melbourne Airport handled six international airlines and 155,275 international passengers. Melbourne Airport has four main terminals: one international terminal, two domestic terminals and one budget domestic terminal. What we found particularly interesting was the fact that Sydney to Melbourne air route is one of the most-busiest air routes in the world. It’s hard to believe considering air routes such as LA to San Francisco or Singapore to KL, but the numbers don’t lie. The number of flights that travel between Sydney and Melbourne is around 54,519 a year. This route trumps destinations such as Mumbai to Delhi or LA to San Francisco which came in at number seven with 34,897 flights. Melbourne Airport is easily one of the busiest airports in the world. In July 2018, it recorded almost 3.3 million international and domestic passengers and recorded its busiest day on record for International Arrivals – more than 20,000 passengers. Melbourne Airport says July was its busiest month on record with close to 3.3 million people travelling in July, up 3.3% compared to July 2017, smashing the previous record of 3.2 million in December 2017. The bottom line message here, Melbourne Airport is consistently one of the busiest airports all year around with numbers in July that are similar to Christmas and the New Year’s break. One of the reasons for Melbourne being such a busy airport is its location. Victorian travellers love to escape the winter chill by flying overseas or venturing to warmer destinations on the domestic network during July. What makes Melbourne Airport extra special however, is its unique strategic advantage over any other Australian airport. Its 24 hour 7 day a week operating hours give it a huge leg up. Sydney Airport is only open form 6am to 11pm. That means Sydney Airport has 2 peak times during operations. Melbourne Airport however has 3-4 peak times. One of them occurring from 12am-2am and the other in the early morning. What this means,…

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