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AUSTRALIA. The Australian Government today approved the building of a second international airport for Sydney, to be located in Badgerys Creek to the west of the city.
Planning for the new A$2.5 billion airport will start immediately, said Australian Prime Minster Tony Abbott, and construction should start in 2016. The airport will open “by the mid-2020s”.
The government said: “It is envisaged that most of the cost of the airport will be met by a private sector operator. Without a new airport, we run the risk of the existing Kingsford-Smith Airport reaching capacity. Sydney’s airport is the gateway to Australia’s largest city and accounts for 40% of international arrivals and 50% of international air freight each year. If no action is taken on a second airport, Australia would lose out on 80,000 additional jobs and A$34 billion in economic activity by 2060.”
Southern Cross Airports Corporation, the operator of the existing Sydney Airport, has the first right of refusal on building the new airport. The company has two years to make a decision. The government has written to Southern Cross with the aim of beginning formal consultations.
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Sydney Airport: Right of first refusal to build the new facility |
Sydney Airport noted the government’s decision, saying that a second airport should be developed “as demand requires”.
It added: “Sydney Airport has a Right of First Refusal which sets out a detailed process that will be worked through as and when appropriate. In the meantime, we will continue to engage in constructive discussions with the federal government.
“In the interests of the travelling public, airlines and our shareholders, Sydney Airport will apply appropriate commercial and financial discipline throughout any process.”
In February this year, the government approved Sydney Airport’s Master Plan to 2033, which envisages a new international terminal. But the government also stressed the need for a new airport to serve the city.
Sydney Airport said today: “Sydney Airport’s approved Master Plan 2033 shows that we can meet forecast demand of 74 million passengers in 2033. Together with government, stakeholders, airline partners and the community, we are focused on improving the customer experience, increasing efficiency and enhancing capacity at Sydney Airport.”
If Sydney Airport does not exercise its option to build the new airport, the government can proceed with the development itself or with another operator.
Speaking to the Australian Financial Review, Credit Suisse analyst David Bailey said he expected Sydney Airport to take up the option, though he noted some uncertainty about the timing and the impact on the existing airport.
He said a new airport could ease capacity constraints, and could be an option for low-cost carriers assuming favourable pricing.
He said: “On the assumption that full-service airlines remain at Kingsford-Smith, this may have positive implications, particularly if the shift allows a greater proportion of higher yielding international passengers at the primary airport.”
“Conversely, the key risk of a second airport is a significant capital investment at a time when larger aircraft are being utilised at higher load factors with surplus capacity at the primary airport.”
The new development will be followed with keen interest by airport commercial concessionaires in the Australian market. The project will not affect the recently launched tender for duty free at Sydney, but – depending on the timing of construction – could be a factor in the next duty free bid at Sydney, likely to be in the early 2020s.
As reported, Sydney Airport has attracted 11 responses to the company’s call for Expressions of Interest (EoI) in its duty free tender, launched earlier this year.
