Dispute heats up between the airport and the Allan and Albanese governments, which threatens to further delay the $10bn project

An independent negotiator will try to resolve a standoff between the Allan government and Melbourne Airport as secret documents reveal a massive compensation claim.

Melbourne Airport is demanding more than $1bn compensation for Airport Rail Link works with the state government warning it won’t be “held to ransom”.

A bitter stoush is ramping up between the airport and the Allan and Albanese governments, which threatens to further delay the $10bn project.

The revelation of the massive compensation claim comes as federal Infrastructure Minister Catherine King moves to appoint an independent negotiator in a bid to iron out differences around the project.

“What I can do as the Commonwealth is bring an independent negotiator to the table to try and resolve this issue,” Ms King said on Friday.

“This issue has been going on for a long time, Jacinta and I have had a lot of conversations about it. I think we’re both frustrated by it and we’ve got to get it resolved.”

The airport wants more than four times the costs outlined in the project business case.

Secret documents obtained by the Herald Sun reveal the airport wants more than four times the costs outlined in the project business case.

In the documents, the airport is claiming two lots of compensation for land devaluation – worth $370m – are needed after it has gained the new transport link.

A state government source said it was “unwilling to be held to ransom”, with the airport also issuing 10,000 technical requirements.

Both the state and federal governments are urging Melbourne Airport to co-operate to get the works back on track, after the Commonwealth recommitted $5bn to the project following its long-awaited infrastructure review.

The issue of whether the station at the airport will be underground or elevated has been a key sticking point in ­negotiations.

But the airport is also claiming the land will lose $15m in value, and it will need $449m to meet its depreciation claims.

It also wants $162m to extend the canopy parallel to the front of terminals two and three, $19m for bus reversal works and $9m for landscaping improvements.

Among the thousands of demands, airport bosses want wall surfaces to form part of harmonious design proposals that “engage the five human senses to reduce anxiety”.

They also want fountains or water play areas and the roof to be lined with timber battens to “emphasise the horizontality of the roof planes”.

The state and federal governments are urging Melbourne Airport to co-operate to get the works back on track.

Premier Jacinta Allan has conceded the total cost of the Airport Rail Link is at risk of blowing out further because of ongoing delays, admitting the 2029 opening date would be pushed back.

Ms Allan said Melbourne Airport had been “incredibly frustrating” to deal with throughout the past three years, accusing them of playing “stalling tactics” to delay the project.

“Frankly some of the demands from the airport have really stretched the boundary of what is an acceptable request from the state,” Ms Allan said.

She urged federal Transport Minister Catherine King to take responsibility and fix the breakdown because the airport is on Commonwealth land.

But Ms King was quick to point out that it was the state that delayed the project in its budget, as it sought to ease pressure on its bottom line due to mounting debt.

Ms King said she could not force Melbourne Airport to submit a planning application for her to assess, adding the dispute over the location and whether there should be compensation was behind the project’s delay.

She said she did not know how much money the airport was demanding in compensation because she had not been involved in those talks and refused to put a timeframe on the resolution.

Asked if they had a right to compensation, Ms King said she could not provide legal advice.

But Melbourne Airport fired back at the Victorian government, calling on Jacinta Allan to work “constructively” with stakeholders.

Jacinta Allan says the airport had been ‘incredibly frustrating’ to deal with. Picture: Andrew Henshaw

Airport executives have requested to meet with the federal and state governments to reignite conversations about the project.

A Melbourne Airport spokesman said there were “numerous technical elements” needed to be resolved with the government’s preferred elevation station.

“It is disappointing that the state government has sought to characterise this as compensation,” he said.

“It is essential that the 100,000 passengers who transit through the airport every day are not subject to significant disruption during the construction and operation of airport rail.”

Melbourne Airport has also taken aim at the state’s “willingness” to push back the project despite believing that one of the key benefits of an above-ground station would be shorter construction timelines.

“We were previously part of a consortium that offered to contribute up to $7 billion to help build an underground station and express tunnels, but the government said no,” the Melbourne Airport spokesman said.

“Having opted to delay the project, it has demonstrated a willingness to work to a longer timeline and as such, we would encourage the state to work constructively with Melbourne Airport to properly explore an underground option.

“We are actively seeking a meeting with (federal Infrastructure) Minister (Catherine) King and Premier Allan to discuss how we can move the project forward in a timely manner.”

The state and federal governments have committed $5bn each towards the project, which is estimated to now cost $13bn.

The Albanese government has not ruled out going 50-50 in any further cost blowouts for the project.

Federal Transport Minister Catherine King says the blame game has been ‘really ­unhelpful’. Picture: Martin Ollman

Ms King, who earlier this month pointed the finger at the airport over the project delay, on Thursday said the “blame of one over the other is really ­unhelpful”.

As the planning minister for airports, Ms King said Airport Rail could not be built until it was determined where the station was going to go and if costs had soared.

“It’s really difficult because it does require the airport to come forward with a planning application as to where the station is going to go,” Ms King said.

“We will engage in a process cooperatively with the Victorian government, with Melbourne Airport, to try and resolve this issue.”

Asked if it was a joint responsibility, she said: “It always has been.”

A Melbourne Airport spokesman refused to answer whether it had made 10,000 demands, saying it remained the operator’s strong preference for the station to be built underground.

He said the airport “remains ready” to work with both governments to develop and deliver the important project, adding it was “important to get it right”.

“The airport station must be fit for purpose and future proof, to ensure that passengers are well served and so that neither the airport precinct or rail line are constrained as Melbourne continues to grow,” he said.

But state Transport Minister Danny Pearson said the government would not reconsider building the airport station underground.

Federal Opposition infrastructure spokeswoman Bridget McKenzie called on Ms King to show leadership and sort out the dispute.

Senator McKenzie said it was farcical that Melbourne did not have a train between the airport and CBD because the state Labor government was having a fight with Melbourne Airport.

State Opposition leader John Pesutto also urged Ms Allan to sit down with Melbourne Airport to sort out the mess.

Moonee Valley mayor Pierce Tyson called on Melbourne Airport to get on board with the project, saying it appeared to be the only barrier to it proceeding.