Badgerys Creek airport ‘unviable without substantial support’

Development of Sydney’s Badgerys Creek airport is unviable without substantial government support, Sydney Airport says.

Proposed site of the western Sydney airport at Badgerys Creek. Picture: Jonathan Ng

Development of Sydney’s second airport at Badgerys Creek is unviable without substantial government support, Sydney Airport said yesterday.

Announcing its 2016 financial result, which showed a surge in passenger numbers and revenue, Sydney Airport said the massive western Sydney development needed “material support from the commonwealth to make it commercially viable” and the federal government’s terms do “not feature any material support including previously contemplated procurement protections and the impact on Sydney Airport”.

Sydney Airport was granted first option to develop the site in a 2002 agreement linked to its ­privatisation.

Jeremy Prentice, a partner with law firm K & L Gates, said Western Sydney Airport faced a “funding headache” because its first customers were likely to be budget carriers.

“We have seen from other major airport developments that the main users of the new airport … are very unlikely to make any long-term commitments to usage and an associated payment to support upfront development costs.”

The concerns raised by Sydney Airport about Badgerys Creek are unlikely to concern the government, which seemed willing to undertake the project alone when the draft contract was first offered to the company in December.

“Should Sydney Airport choose to decline the opportunity to build and operate Western Sydney Airport, the government will be free to develop and operate the airport itself, or to offer the opportunity to other private sector companies on substantially the same terms as those offered to Sydney Airport,” Minister for Urban Infrastructure Paul Fletcher said at the time.

If Sydney Airport accepted, the contract requires the listed airport operator to build a 3.7 kilometre runway and a terminal capable of handling 10 million passengers a year. The company would also have to open the airport by 2026. “All of the costs of building and operating the airport would be met by Sydney Airport in return for all of the economic benefits of ownership of the airport over 99 years,” the government said.

This is where concerns of financial and commercial viability come into play, with the development predicted to cost upwards of $5 billion and unlikely to generate adequate financial returns for at least a decade.

Government frontbencher Karen Andrews said in December that if Sydney Airport were to decline, it would not be “an unexpected response”.

“The ball is now in their court,” she told Sky News. “We’ve also made it very clear that there are other options but Sydney Airport group does have the right of first refusal.”

Sydney Airport has until May to decide whether it will exercise the Badgerys Creek option.