Badgery’s Creek Master Plan

The rejection of a federal government proposal in favour of a local government alternative is arguably, a first for the PWC. While it could be considered a unique victory for the local councils involved, the PWC’s decision, however, raises several issues for the Federal Government which when resolved, may see that victory being short lived.

Accepting the PWC recommendation means the Federal Government will have to treble its $47m equity contribution to the FAC – on FAC figures. Should it be unwilling to do so, the PWC proposed that a consortium of interested groups make up the cost difference. This would require a radical shift from government policy that all major airports be operated by the FAC.

On the other hand, rejecting the PWC recommendation could be politically damaging in an election year, especially since the soundness of the PWC’s judgement was recently demonstrated by the McPhee inquiry findings into the Civil Aviation Authority’s tendering process for its new $300m air traffic control system.

So how did the Federal Government end up in such an unenviable situation? To answer this, lets set the scene first.

Background

Studies to secure additional airport sites for the Sydney Basin began seriously some 20 years ago. But until recently, all such efforts ended in failure for a variety of reasons. Then, after a comprehensive selection process, Badgerys Creek was chosen in 1986 as the site for Sydney’s second major airport.

From an aviation perspective and considering the implications that have emerged for air travel, tourism, and the economy, the Badgerys Creek 1,780 ha site represented to the Federal Government a unique piece of real estate that had to be retained and protected.

The Argument

Embarrassed with holding such a valuable site idle, the government decided in 1991 that a GA airport with an 1800m long runway would achieve its objectives at minimum cost.

But the FAC/DoTC were unable to convince the PWC that the project as proposed, was the appropriate first stage of a second major airport for the Sydney region. This can be attributed to three factors. First, the FAC/DoTC approach and tactics did not appear to have been based on rational planning. Second, the FAC’s focus is singularly on the bottom line. Thirdly, it was their first experience before the PWC without having a clear cut case of need for a project. These factors manifested in a number of flaws in the evidence presented. These were:

• the FAC were ambivalent about the need and justification for the GA airport;

• failing to present any form of traffic forecast as is normal practice, the FAC had no airport marketing strategy either;

• FAC/DoTC did not seem to anticipate the PWC’s sensitivity to complaints arising from aircraft noise and surface access to airports;

• the FAC did not consider a range of alternative airport proposals; and

• of ten the FAC argument came across as contradictory. Let’s consider each flaw in tum.

First Flaw: The FAC has a model it uses to update traffic forecasts for its airports. But for Badgerys Creek, the FAC said they could not demonstrate any demand for a GA airport. The demand for a second major airport at the site was also “unknown”. And the market would not support a major passenger facility there “before about the year 2010”.

The FAC also said the project could not be justified commercially at this time. But with the $47mgovernment handout, they supported an immediate go ahead by citing nebulous and unspecified “long term benefits”.

In the FAC’s view, there was a range of potential users. However, their heavily qualified statements about revenue prospects amounted to nothing more than a plea for the PWC to trust their judgement; hardly credible when the FAC did not even know what the revenue flow would be. They were still working on it because the revenue flow “very much depends on what market you identify”.

The FAC was also unable to gain support from the aviation industry. The Aircraft Owners and Pilots Association of Australia said GA was “in a state of decline” and they expected no growth in the next decade. Not surprisingly, the domestic and international airlines were also not interested.

Also, while the words “cost benefits” analysis were bandied around, FAC/DoTC gave no indication that such important implications as cost penalties to the aviation industry and community impacts had been evaluated. For instance, without a revenue flow, the FAC denial that pressure would be put to have sections of the GA industry relocate to Badgerys Creek, couldbe given no credibility. The PWC concluded the FAC had taken no account of “the scope for industrial growth in the western region of Sydney”.

Further, the FAC rhetoric was that it had a “target return” of 7. 5% pa for the $47m subsidy. But how this would be realised when only phantom traffic had been identified, was left to the imagination. The FAC also claimed that their objective was to provide “value (for the taxpayers’) dollar”. Since they were to pay the princely sum of $1 pa for the $120m Badgerys Creek site, this claim is beyond comprehension,;’·

Second Flaw: In case their rhetoric about potential traffic was not convincing, the FAC also tried the opposite tack, thus turning the accepted method of project justification on its head.

They asserted that providing the capacity would bring the demand out of the woodwork. But they then presented this gem of a contradiction. While claiming the airport would be used for advanced pilot training, they were not prepared to outlay a relatively small sum to provide the necessary instrument landing system (ILS). No, they said. The “demand does not exist at this moment”. “The proposal to establish ILS training . . . is . . . demand driven . . . “. It seemed not even the FAC had confidence in their own assessment of potential airport users.

Then the FAC exposed the Achilles heal of its ‘capacity first’ argument by admitting they had not undertaken a market analysis and had no marketing strategy or plan. They threw around many ideas and possibilities about potential users of the airport, but it was apparent that if any serious attempt had been made to actually document any of them, or to demonstrate their relevance, viability, or implications, they were not prepared to submit their findings to public scrutiny. Third Flaw: FAC/DoTC did not factor the PWC’s concerns for compatible adjacent land usage and adequate surface access into their justification equation. Both said they could not give the PWC guarantees that these fundamental needs would be met. Instead, they passed the buck to the state and local governments.

In contrast, the PWC report claims that DoTC had undertaken consultations on these issues and that the state had provided adequate solutions. If that was the case, why had FAC/DoTC not said so and presented appropriate documentation?

Fourth Flaw: A typical sign of poor planning is the fact that the FAC did not consider a range of prudent and feasible airport options. This is a basic requirement to selecting an optimal solution and ensuring that the decision making process can stand up to public scrutiny.

The Final Flaw: In addition to the inconsistencies in their evidence already identified, the FAC tried to justify their GA airport proposal by outlining a theory expounded by their consultants. This is based on studies of the operation of multiairport systems in the western world, which are said to demonstrate that: • “Traffic in a multi airport system inevitably centres on a primary airport, so that even when a second airport becomes established it still does not attract a major share of the total traffic”; and • “A second airport in a multi airport system tends not to develop sufficienttraffic to justifyits investment until the level of originating passengers in the region exceeds a threshold of around 10 million per annum” (around 15m pax used KSA in 1992).

This indicates two things. Second major airports become commercially viable only in the longer term. Therefore governments need to intervene to establish them.

But the FAC provided an inadequate explanation. Thus it is not surprising that the PWC misinterpreted the FAC argument and concluded “that the FAC proposal places too much emphasis on passenger demand and does not take account of the potential growth of freight services to the Asia/Pacific region”.

The Dilemma

The PWC’s recommendations raise several key issues.

What is the “minimum associated infrastructure” that is to go with the 2900m long runway? And by exactly how much will it increase the $56m cost? The FAC claims the cost will escalate to $152m. This is where a local government based consortium needs to ensure that DoTC/FAC preconceptions do not hijack the agenda

Then, is the government prepared to radically change its major airports policy and allow a body other than the FAC to control andoperate BadgerysCreek? And will the government be as generous to a consortium in its terms of agreement as it appears to have been with the FAC?

Fortunately, it is in the Federal Government’s best interests to resolve these issues amicably. Also a Coalition victory at the next election will endorse privatisation of Badgerys Creek, so eliminating one expected impediment. Meantime, local government needs to do its homework on the scope of the “associated infrastructure” that is justified, put together a credible consortium, and prepare airport marketing and management plans.

Conclusion

Observing the FAC/DoTC performance one could have been forgiven for thinking that airport planning had remained unchanged for two decades.

Only a few years ago, the Melbourne Airport Strategy demonstrated a planning approach that could readily and effectively deal with all issues a rising. Here all the major interested parties were involved in identifying the optimum strategy, and then collectively took the responsibility to protect that strategy by appropriate measures. For example, the state government enacted legislation to protect a future rail right of way to Melbourne airport.

The PWC could consider making such a strategic approach mandatory for all airport proposals. Then it would be confident that it could not be criticised for noise and access problems arising down the track, as it is today. This approach simply extends the PWC requirement that all airport projects be developed within the context of their master plans.

Such a strategic approach could have avoided the current debacle surrounding the Badgerys Creek GA proposal.

Tony Tsipouras is a freel,a,nce consultant involved in airport and airways analysis.