Macquarie Airports (ASX:MAP) is one of the world’s largest private airport owners and operators with a core portfolio of three major airports – Sydney, Copenhagen and Brussels.

It has been one of the hot stocks in recent weeks, surging from around $3.00 in June to be currently trading at $3.40.

MAP announced yesterday that it has completed its asset swap with the Ontario Teachers’ Pension Plan (OTTP).

The deal was revealed last month, but the finer details have now been settled.

Under the deal MAP will acquire OTPP’s 11.02% stake in MAP’s Sydney Airport, taking MAP’s ownership level in its key asset to 85%.

In exchange, MAP is handing OTTP its stakes in the Brussels and Copenhagen airports.

OTTP will also pay MAP approximately $791 million.

The deal will see MAP focus purely on its Sydney airport asset, reducing its exposure to the struggling European market. It will also simplify the company’s corporate structure.

MAP will also be cashed up after the deal and expects to make a return of capital or special dividend of around 80 cents to distribute the surplus proceeds from the OTPP.

The airport manager also gave distribution guidance of 21 cents per security for 2011 and 2012.

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Macquarie Airports or MAP Group (MAP) is one of the world’s largest private airport owners and operators with a core portfolio of three major airports – Sydney, Copenhagen and Brussels.

In July 2009, MAP announced plans to split from its parent company Macquarie Group (MQG) in a bid to cement its independence, which was applauded by the market.

MAP has managed to hold steady in the face of global economic headwinds.

Natural disasters, higher oil prices and adverse currency movements are some of the challenges MAP has been facing.

MAP has managed to ride out these turbulent times helped by a strong operational model. Continued cost management is driving operational leverage.

The company’s airports have performed particularly well whilst MAP has also benefitted from a gradual restoration of airline capacity, continued delivery of new routes and services and revenue initiatives and productivity gains.

Mapping profits

In February, MAP reported a FY10 net profit of $100.8 million, swinging from a $572.7 million loss from the prior year.

Proportionate earnings grew 19.3% supported by 6.9% traffic growth. EPS was up 10.9% to 23.9 cents per share.

Revenue increased 6.3% to $1 billion, with strong traffic growth from Sydney and Copenhagen offsetting the negative impacts of last year’s European ash cloud.

The group’s balance sheet was also in healthy shape, with no debt maturities until December 2012 and around $830 million of cash.

MAP was bullish about the 2011 outlook, saying it expects traffic growth across all of its airports supported by the launch of new routes and services.

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Traffic numbers

For the first quarter, most of MAP’s segments delivered solid operational growth. Brussels was a standout, with a 6.7% rise in traffic numbers.

The world’s fastest growing economy, China, became Sydney’s third largest inbound market.

Map also experienced significant growth in Copenhagen commercial revenues as a result of the repositioning projects implemented in 2010.

With new debt facilities at Copenhagen, MAP’s capex programme is fully funded until March 2015.

Sydney continues to enjoy a strong outlook related to both demand and supply side passenger traffic drivers.

MAP sounded a positive outlook, saying that all of its airports are in excellent condition and that its current growth initiatives are likely to yield earnings and distribution growth going forward.

Looking ahead

MAP will benefit from increasing aircraft technology delivering more seats at a lower cost.

New and announced capacity increases will continue to drive growth, particularly in the long haul segment.

Its EBITDA margin increased from 66.9% in 2009 to 70.4% in 2010. The company is looking to consistently improve this figure which would result in increased profitability.

MAP is also enjoying strong traffic growth at its key airports which bodes well for future earnings.

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