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Dec 21, 2016

Govt ready to seize opportunity to end Sydney's airport monopoly

For tens of million of abused Sydney Airport users, could sweet revenge be at hand?

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A simplified guide to the economic relevance of Badgerys Creek
A simplified guide to the economic relevance of a Badgerys Creek airport

Commentary Back in 2002 when PM John Howard and his treasurer Peter Costello ditched free market principles to sell the publicly owned asset of Sydney Airport into the gentle and caring monopoly control of a Macquarie Bank consortium for $5.6 billion, a seemingly eternal orgy of screwing every last cent out of the airlines, their customers and some on site retailers set in at Australia’s major air travel gateway.

Could it be that it is about to be ended? The Sydney Airport Group which now owns the main, and desperately inadequate and outrageously uncompetitively priced Kingsford Smith Airport is making a lot of noise in the general media about how it might not use its first right of refusal to build and operate the second Sydney basin airport at the Commonwealth owned site at Badgerys Creek in Sydney’s west.

Given the arrogance and indifference of Sydney Airport to criticism of its treatment of airport users ever since who cares? It was made about as clear as it can be by the Turnbull Government yesterday that the new 24 hour international and domestic airport would up and running by 2026 with or without the participation, to the tune of around $5 billion, of Sydney Airport Group.

The government is reported to have withdrawn an offer of an Adani, or a $1 billion loan, to Sydney Airport to help the poor struggling dears build the Sydney West airport and thus ensure that there would never be competition between two airports serving the greater Sydney region, and its 7-8 million people by the middle of this century.

This is a golden opportunity for Sydney to escape from the cavalier mistakes of Howard and Costello back in 2002. There really is no such thing as an enduring public benefit from the sale of natural monopolies to private owners without imposing a set of iron clad conditions on future pricing, and when it came to Sydney Airport, both the Coalition and its Labor successors adhered to a so-called ‘light handed approach’, which basically told the public to suck-it-up.

However it is probably unlikely that Sydney Airport will walk away from building and operating Sydney West.  The shock of the cultural change of having to cede pricing power to a competitor which in time might rival or eclipse it in size might prove too unpalatable to swallow.

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