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Dec 20, 2016

Deal or no deal? Sydney Airport told 2nd airport could cost it $5 billion

How much would Sydney's existing airport pay for 99 year monopoly control over a 2nd Sydney airport?

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Stage One graphic of the Sydney West Airport development 10 years from now
Stage One graphic of the Sydney West Airport development 10 years from now

A rather shoddy PR campaign to get Sydney Airport’s existing owners into monopoly pricing control over its 2nd airport at Badgerys Creek for a pittance (or $1 billion) appears to be coming unstuck.

The Turnbull government today served Sydney Airport’s owners with a notice of intent to go ahead with the new Sydney West Airport and made it very clear that it was a take it or leave it deal when it came to their exercising a first right of refusal to build it and then operate it for 99 years.

That would cost Sydney Airport Group between $3 billion to $5 billion upfront for what amounts to the right to gouge airliners, their passengers, terminal retailers and car parkers for whatever fees it thinks it can get away with for the following century.

The fanciful figure of $1 billion for just building the terminal that was floated last week didn’t come from government sources.

The Minister for Urban Infrastructure, Paul Fletcher, said this morning that if it accepted the terms of the ‘notice of intent’ Sydney Airport Holdings would have open the airport served by an initial single 3700 metre runway by 2026, with a terminal able to take an initial 10 million passengers a year, and start work on heavy earthworks required to level the site by the end of 2018.

Minister Fletcher said Sydney Airport was assumed to be familiar with the terms of the deal following hundreds of meetings between the company and the government concerning the building of the 24 hour airport, which will be open domestic and international flights and able to take jets up to the size of an Airbus A380 from day one.

The existing airport’s owners have at most nine months in which to agree to the terms of the ‘notice of intent’ prior to entering into a binding contract. Minister Fletcher made it clear the government wanted an answer sooner than that. If they declined the offer the Commonwealth, which owns the Badgerys Creek site, would build the the new airport itself, or with an alternative private consortium.

In a statement Mr Fletcher says:

“All of the costs of building and operating the airport would be met by Sydney Airport in return for all of the economic benefits of ownership of the airport over 99 years.

“Should Sydney Airport choose to decline the opportunity to build and operate Western Sydney Airport, the government will be free to develop and operate the airport itself, or to offer the opportunity to other private sector companies on substantially the same terms as those offered to Sydney Airport today.”

(This would end Sydney Airport’s monopoly over airport charges and see price competition emerge for airline access to the greater Sydney metropolitan basin, which has a population of approximately 4.7 million today and is estimated to exceed 7 million people by the middle of this century.)

The Federal Government has already started work on a $3.6 billion package of access roads and other western Sydney infrastructure improvements, and has required the new airport to be rail service ready on opening. The Badgerys Creek site can be connected to either or both of the main western and southern suburban rail lines without the cost of extensive tunneling.

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