Sydney Airport to decide on Badgerys Creek by May

The federal government has officially "declared" Badgerys Creek as the site for a second airport in Sydney. (Jordan Chong)
The federal government has officially “declared” Badgerys Creek as the site for a second airport in Sydney in August 2015. (Jordan Chong)

Sydney Airport says it plans to have a decision on whether to take up its right to build and operate the proposed airport at Badgerys Creek by early May.

In December, the federal government issued Sydney Airport a Notice of Intention (NOI), effectively a sales contract, that outlined the formal contractual terms for the project.

At the time, the government gave Sydney Airport four months to consider the offer, with the deadline on making a decision set for May 8.

While Sydney Airport has objected to the four-month deadline and continues to argue it should have nine months to consider the NOI, the company said on Thursday it would work towards the May 8 timetable.

“We remain of the view that we are entitled to a nine-month consideration period but will be endeavouring to meet the Commonwealth’s timetable,” Sydney Airport chief executive Kerrie Mather said during the company’s calendar 2016 full year results presentation.

“As soon as we have adequate information to make an informed decision, we will do so.”

The company booked $21 million in expenses, including $16 million in external costs, in its calendar 2016 accounts towards the proposed Badgerys Creek Airport.

“We are continuing to adopt our rigorous approach to the evaluation process, applying our disciplined investment criteria including consideration of rates of return, cash flow, growth potential, downside protections and the impact on Sydney Airport,” Mather said.

“Confidential and detailed market soundings with the contractor market are in progress to further inform our view of the construction costs.”

Mather reiterated the airport company’s view that Badgerys Creek would be a challenging investment proposition, given the NOI said Sydney Airport would be responsible for all of the costs of building and operating the airport.

“Given the significant challenges the project will face, Sydney Airport has consistently expressed its opinion that the Western Sydney Airport project would require material support from the Commonwealth to make it commercially viable,” Mather said.

“However, the Commonwealth delivered a NOI that does not feature any material support including previously contemplated procurement protections or Commonwealth funding which makes WSA a challenging investment proposition.”

The government said in December there would be no direct financial support from the Commonwealth towards building and operating the proposed airport at Badgerys Creek. The cost of construction was estimated to be between $5 billion and $6 billion.

When the Commonwealth sold Sydney Airport in 2002 it included a 30-year first right of refusal to build and operate any airport within 100km of the existing terminals at Mascot.

Minister for Urban Infrastructure Paul Fletcher said in December the government could choose to build and operate the airport itself or offer the opportunity to private sector companies should Sydney Airport decide not to exercise the right of first refusal.

The final Western Sydney Airport Plan showed Stage 1 of the airport would feature a terminal capable of handling up to 10 million domestic and international passengers a year, with a single 3,700m long by 60m wide runway on a 05/23 orientation.

The design of the facility would allow for a second parallel runway and expansion of the terminals to cater for 37 million passengers a year by 2050 and 82 million a year by about 2063.

The terminal design would feature swing gates capable of handling both domestic and international flights, which would increase the efficiency of transfers and increase the use of contact gates equipped with aerobridges.

Meanwhile, jet fuel supply was expected to be delivered by road tanker in a similar way to other airports operating on this scale, such as Canberra and Gold Coast airports.

And the Airport Plan said flightpaths had not been finalised, noting the draft flightpaths shown in the draft Airport Plan were a “conceptual model for aircraft arrivals”.

On the financial results, Sydney Airport reported net profit for the 12 months to December 31 2016 of $320.9 million, up 13.4 per cent from $283 million in the prior corresponding period.

Total revenue was 11 per cent higher at $1.365 billion, the airport said in a regulatory filing to the Australian Securities Exchange on Thursday.

Aeronautical charges, which made up 45 per cent of the airport’s total revenue and comprise payments from airport users for terminal and airfield infrastructure use, rose 17.4 per cent to $614.2 million.

Revenue per passenger increased 5.2 per cent in calendar 2016 to $32.60 per passenger, compared with $31 per passenger in the prior corresponding period.

Sydney Airport declared a final distribution of 16 cents per stapled security, bringing total distributions for calendar 2016 to 31 cents per stapled security. The company has guided the market to an increase in distributions to 33.5 cents per stapled security for calendar 2017.

Passenger numbers through its domestic and international terminals were up 5.6 per cent at 41.9 million.

“We are committed to maintaining a disciplined and focused approach to delivery on our strategy, which is positioning Sydney Airport well for future success,” Mather said in a statement accompanying the financial results.

“Our confidence in the outlook for the business supports the guidance for a distribution increase in 2017.”

Comments

  1. ian says

    Sydney Airport – not a bad business to be in – 23% profit on turnover.
    Badgerys though must be challenging. How do you fund in excess of $5b and generate sufficient return to justify the investment from initial projected passengers of 10mil?

  2. Grant says

    The only sensible decision is not to build it. Remove the curfew and the hourly movement cap from KSA and Sydney won’t need a second airport for another 100 years.

  3. Damien says

    Your living in a fantasy world grant.

    No polition is going to want to get all the Voters near mascot offside.

    Where as most of Western Sydney now want the airport.

    It’s all about perception.

  4. Alpha141 says

    For me, the perception i see is a corporation having the opportunity to gain a monopoly of air travel in one of the biggest, wealthiest, sought after world wide destinations. Not to mention the major gateway in and out of Australia. Macquarie Bank pretty much runs Sydney regards to anything infrastructure wise. Toll Roads, train line access to Mascot included along with a lot more.. Hence the rail access issues with this project. I am sure.has been a negotiation issue hence not in the plan. I am sure they (Macquarie) came out pretty well in that 2002 deal like the mentioned 30yr rights to first competition within 100km. You would probably find the prices relative to Mascot on many many levels really astounding in comparing to other such places. Tariffs, Landing Fees, Parking, etc. Thus the healthy margins and profit. To even be afforded the opportunity to gain a monopoly is the risk here and not a part of the focus. Would it not be in the interest of the public for another vendor to have rights for competition? Cheaper air travel might be a windfall for all.. Success for airline’s’ and an increased volume of flights to choose. I am not against success. Good business or management at all. While the outside public perception it seems difficult to get all going the amount of resistance on this really makes what is going on obvious to me. Just some focus would be timely on such matters in my opinion as there sure seems some vested interests around. Enjoying AA’s articles and comments of late all. Cheers

  5. Peter says

    Shows you how commited the big end of town and government are to competition. Truly staggering that Sydney Airport Corp should have this right in the first pkace. Lets cut the gordian knot and get the Federal government to build and operate this airport until at least 2025. About time SAC faced some real competition. I’d vote for that.

  6. Craig Clarke says

    I live at Mascot, very close to Domestic Terminal, by choice, I most of the time enjoy watching my planes. 24 non curfew forget it. I wonder where other people live who have had made comments !!!

  7. random says

    Damned if you do, damned if you don’t.

    If SAC does take the rights, then they have the monopoly – and whilst this SHOULD provide obvious advantages it will most likely fall down and become mired in decisions and actions that suit the company but do not necessarily serve the general public. This includes all of the ancilliary and connecting infrastructure.

    If SAC does not take the rights, they potentially make life so hard for any competition that any collective advantages that SHOULD arise from having 2 airports will be eroded in petty politics and cut-throat business tactics as the 2 facilities fight eachother rather than serving the needs of the general public.

    The great danger here is that whilst these are run as businesses (aligned or opposed) they operate to serve their shareholders above and beyond the needs of the public. One would think in any business that serving the customer / public effectively would always produce better results for shareholders in the long run – unfortunately in the modern world these mantras do not go hand in hand.

  8. Trump is right! says

    Oh great….. So us tax payers will subsidise a bank …. Oh sorry…. Sydney “airport”…..

    When will people learn that privatisation is mostly a crony capitalist idea, meant for the big boys club at the top of the food chain!!

    IF THE GOVT subsidises this second airport, then it should be owned by the people!! Not sold off in some back room deal that once again see’s taxpayers pay for it and get shafted as well!!

  9. Michael Andrew says

    Has anyone calculated the numbers of fuel trucks that will now be heading to and from Badgerys Creek? Who pays for the road damage and repairs? What is the additional risk to motorists and infrastructure by introducing these Jet Fuel laden trucks to our roadway network? What route will these trucks take to Badgerys Creek and return? What Motorway tunnels are part of any proposed fuel cartage route?

  10. Dee Thom says

    Why do we need a second airport?
    There is a consortium out there who are willing to build a maglev fast train, not Shinkansen style old bullet trains, that could cut travel to and from the East Coast Capitals to near aircraft times, CBD to CBD. This would take the pressure off SAC, and keep it viable for many years to come, and expand our ever increasing incoming tourist population.

  11. Kurt says

    Competition is lacking in Sydney on the international scale and if the right moves are not made now then Sydney will be left behind .