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Badgerys Now Combined With KSA To Boost Sale Prospects

Finally realising that there was no investor interest in acquiring Badgerys Creek on its own, the Government announced in the May 9 Budget that it was to now group Kingsford Smith (KSA) and Badgerys Creek as one. The move should add significantly to the overall value of the Sydney airport offer, particularly so as it removes the burden of the loss-making GA airfields of Bankstown, Hoxton Park and Camden (refer Reece). To further entice bidders and increase the overall value of the bid, the Government is to introduce a $1.70 surcharge on each passenger passing through KSA once the sale documents are signed. The surcharge is payable directly to the new airport owners and is aimed at sweetening the bid and providing additional funding to ensure that Badgerys gets developed to its full potential as a viable international-capable airport by 1999.

Passenger movements through KSA this year are expected to exceed 20 million people, meaning that by 1997/98 it could be expected that this surcharge would increase the net return of the Sydney airport operator by something in the order of $40m. Last financial year KSA earned $175m (rounded) for a profit before interest of $63m. On this basis it could be expected that the operating company taking over the FAC’s role in Sydney could earn something in the order of $100m before taking into account debt servicing requirements. This strategic move by the Government should greatly increase its return compared with selling off the 50-year leases on the two airports individually, even assuming it could find a buyer for a presently non-existent Badgerys.

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