Sydney Airport refuses to build second airport

The federal government now has to decide whether it will build the proposed $3.7bn airport itself or offer the opportunity to private sector companies.

The Australian government has said it will still seek to get a second airport built in Sydney despite the existing hub’s decision not to undertake the project.   

Sydney Airport Group, the owner and operator of Sydney Kingsford Smith Airport, has undertaken studies and consultations over the likely demand, growth potential, construction costs, risk profile and financial returns of the Western Sydney Airport project, which the government endorsed in 2014. 

The company has the right of first refusal to develop and operate a second major hub within 100km of the city’s central business district, according to a sale agreement signed in 2002, when a Macquarie-led consortium bought Sydney Airport Group from the Australian government for A$5.6 billion ($4.1 billion; €3.8 billion). 

The asset manager exited its stake in 2013 to other shareholders. Listed on the Australian Securities Exchange, the airport is owned by more than 100,000 retail and superannuation investors, the largest of which is Unisuper with a 16.4 percent stake.

“Despite the opportunities that the project will present, the risks associated with the development and operation of the new airport are considerable and endure for many decades without commensurate returns for our investors,” said Kerrie Mather, chief executive and managing director of Sydney Airport. 

Infrastructure Australia, the country’s independent statutory advisory body, estimated that delivering the first stage of the project would cost about A$5 billion. Further details will be disclosed in the federal budget to be released next week. 

“After taking into consideration the feedback from the recent market engagement process and investors, and the outcomes of its own evaluation, Sydney Airport determined that the terms of the Western Sydney Airport Notice of Intention do not meet its investment criteria,” Sydney Airport noted in a filing with the Australian Securities Exchange.

Sydney Airport’s decision means the federal government now has two options for the project – either developing and operating the airport itself or offering the opportunity to other private sector companies on the same terms as those offered to the city’s existing hub.   

Scheduled to become operational by 2026, the Western Sydney Airport is expected to service around five million passengers a year, which is about the number of passengers that use Gold Coast Airport today. The figure will grow to 10 million passengers per year in five years’ time.