The vision thing

The headline of the proposal would see Sydney’s three terminals reorganized into a pair of airline alliance-based precincts, a concept already in use at London Heathrow, Tokyo Narita and a number of other airports. Sydney’s current domestic terminals — T2 and T3 — would go to Qantas, Jetstar and the Qantas Group’s partners in the oneworld Alliance, such as British Airways, American Airlines and Cathay Pacific. Virgin Australia, meanwhile, would take over the current international terminal, T1, joined by allies such as Etihad and Singapore Airlines. Carriers not allied with Qantas or Virgin would also primarily use T1. Each alliance “precinct” would handle both domestic and international flights.

The most obvious benefit of the overhaul would be to eliminate, in most but not all cases, the need for passengers to change terminals when transferring between domestic and international services. That, in turn would narrow one of Sydney’s main competitive disadvantages against Melbourne and other airports where all terminals are located under one roof. Under the proposal, a Qantas passenger arriving from Hong Kong en route to Canberra, for example, would be able to stay put in the Qantas precinct rather than having to catch a bus or train across to the other terminal. The airport, of course, hopes that passengers will take advantage of the time they save in transit to go shopping, boosting airport revenues.

But many of the proposed changes appear firmly tailored to garner support from airlines, in particular Qantas and Virgin. “This plan is a response to airlines’ changing business models, particularly their need to be co-located with their alliance partners to remain internationally competitive,” Mather told Australian Aviation.

By centralising their operations, Mather says, airlines would be able to cut costs and improve on-time performance. Eliminating the need to tow aircraft between the domestic and international terminals, though a relatively unusual occurrence, would further boost aircraft turnaround times.

Co-locating domestic and international services, meanwhile, would improve the flow of vehicle traffic to and from the airport by balancing the respective peak times of domestic flights — which tend to be busier during weekday mornings and late afternoons — and international flights, which arrive and depart most heavily in early mornings and on weekends. Somewhat less concretely, the airport says the proposal would also provide for more aircraft gates and parking and pave the way for future terminal expansion.

All that, in turn, could open the way for the airport to argue for an easing of the government imposed cap of 80 flights per hour. While the proposed overhaul wouldn’t directly effect noise levels, the airport makes prominent mention in its marketing materials of the fact that new aircraft designs have already substantially reduced the noise footprint.

For now, Mather said the proposal would allow continued increases in capacity by making better use of existing infrastructure, for example by using swing gates that could accommodate both domestic and international operations. The proposal would also make room for a continued increase in the use of larger capacity aircraft that can carry more passengers even without increasing flight movements.

If it goes ahead as proposed, overhaul could be completed by 2019, the airport says, and would put it in line to cope with what it predicts to be an increase in passengers from 35 million over the past year to 78.9 million in 2029, as aircraft movements jump from 309,000 o 427,400. The price tag of the redevelopment remains unclear, though the airport has flagged a figure of roughly $2.5 billion. The airport has no plan to seek public funding, though it “strongly [supports] investment in infrastructure that improves access to the airport precinct, particularly bus and rail services that give passengers more choice,” Mather said. The airport is also quick to point out that it supports more than 200,000 jobs contributing about $16.5 million to the economy each year.

At any rate, the price tag of the overhaul underscores the considerable amount of work that would be required to bring the proposal to fruition, especially on the Qantas side.

The proposal would see at least one inter-terminal link built between the current T2 and T3. The existing T2 and T3 piers would likely remain domestic piers, while the airport would construct two new piers for international flights, one off the current T3 and the other west of the current T2 piers. Infrastructure for the more stringent international security checks as well as immigration and customs facilities would also need to be built.

The overhaul of the Virgin precinct in T1 would be considerably less involved, though a few challenges would remain, including finding a way to accommodate domestic passengers without requiring them to go through the terminal’s current international-grade security checks.

The proposal also envisions building new maintenance facilities for both Qantas and Virgin in open land south of the airport. Virgin has already proposed building a hanger that could accommodate up to four narrowbody or two widebody aircraft in the northeast corner of the airport, but the location would likely be changed if the proposal goes forward. Meanwhile, the airport proposes relocating the Qantas Jet Base from its current location north of T3 and expanding it to include a small hangar for two narrowbody or one widebody aircraft plus a much larger hanger that could accommodate as many as eight widebody aircraft.

So far, the reception from both Qantas and Virgin has been a warm one.

“The proposed new terminal precinct would have significant benefits for all passengers traveling with both Qantas and Jetstar,” Qantas CEO Alan Joyce said in a statement accompanying the airport’s announcement. “As passenger numbers grow over the next decade, it is vital that airlines and airports work closely together to deliver a seamless travel experience.”

Virgin CEO John Borghetti was also supportive, if less effusive, saying the proposal had “potential” and that Virgin looked forward to “working with all stakeholder to explore its merits in detail, in particular how it supports the growth of Virgin and its alliance partners.”

If actions speak louder than words, than the airport’s non-binding memorandums of understanding with Qantas and Virgin are more convincing evidence of the airlines’ support. The agreements, announced alongside the unveiling of the proposed overhaul, extend the charges Qantas and Virgin pay for international flights from next year through to mid-2015, giving the airport revenue certainty as it pursues the overhaul, while also working toward multi-decade commercial agreements that include “long-term price parameters.”

MAp also entered a non-binding agreement with Qantas to begin talks on early termination of Qantas leases on T3, which run through 2019, and the freight terminal and Qantas Jet Base, which run through 2020. Qantas could save an estimated $350 million by ending the leases early, a move it is rumoured to have sought in the past. Buying out the lease would also give the airport greater flexibility as it pursues future plans, including the possibility of locating some independent carriers inside the Qantas precinct.

The tangible benefits for Virgin could also be considerable. In particular, Virgin would stand to gain domestic traffic in the form of passengers transferring from non-aligned international carriers, most of which would share its terminal precinct.

That, however, points to one of the main drawbacks to the proposal. Sydney Airport has worked hard to attract new carriers, forming a partnership with Destination NSW to promote the airport and compete with a similar arrangement between Melbourne Airport and the Victorian Government. Sydney made much of the December announcement by start-up LLC Scoot that it would launch its first route to Sydney.

But with independent Asian-based carriers expected to play an increasingly vital role in bringing passengers to Australia in the coming decades, the proposed terminal overhaul could prove significantly less attractive to those airlines than to Qantas and Virgin Australia. With most independent carriers expected to be based in the Virgin precinct, passengers of those airlines would either be limited to Virgin’s domestic connections or face an onerous trek between terminals. In a broader sense, the focus on Qantas and Virgin could leave carriers not allied with either feeling like second class citizens.

Regional carriers have expressed similar concerns. While MAp says the proposal would guarantee ongoing access for regional and domestic carriers such as Regional Express (Rex) and Tiger Airways, it has so far left the terms of that access vague, saying it would determine at a later point which precinct the airlines would use. Rex executive chairman Lim Kim Hai has said the airline hasn’t seen enough details of the proposal to reach an informed opinion but warned that the plan could see smaller players run underfoot.

“As the old Swahili saying goes: When elephants make love, it is the grass that gets trampled on,” he told The Australian.

Mather said outreach to regional carriers had only just begun and expressed confidence the smaller airlines would eventually support the proposal.

The overhaul “would improve facilities and services for regional airlines and passengers,” she said. “In fact, regional passengers would have access to international connections under the same roof for the first time, which would allow you to fly from Tamworth to London without having to leave the terminal in Sydney.”

But, she added, “everyone needs to bear in mind that we are at the very start of an extensive period of consultation over this proposal and detailed planning and design will take us up to the 2014 Master Plan.”

That period of consultation — not to mention the results of the long awaited Sydney Basin airport study — are likely to bring out other concerns and could well see the proposal altered or derailed. But for now, the vision-of-a-concept-of-a-proposal amounts to a forceful opening bid as MAp stakes its claim to Sydney’s airport future.