Government willing to go it alone on Badgerys Creek airport

Government seems willing to ‘go it alone’ on building next major airport after handing contract to Sydney Airport.

An artists impression of the new Badgerys Creek airport to be built in Western Sydney.

The federal government appears willing to “go it alone” on building the nation’s next major airport after handing a formal contract to Sydney Airport on the mammoth $5bn project.

The draft contract requires the listed airport operator to build a 3.7 kilometre runway and a terminal capable of handling 10 million passengers a year in order to win the right to own and run the facility for 99 years.

In a tough negotiation to decide how much the private company will pay, Minister for Urban Infrastructure Paul Fletcher said on Tuesday morning the company would 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 in a statement.

“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 today.”

The terms of the privatisation of Sydney Airport in 2002 included a contract with the commonwealth to give the private operator the first right of refusal to run the city’s second major airport if it was ever built.

The company has four months to consider the government “notice of intention” but can ask for nine months if it argues it is not “substantially familiar” with the demands made in the document.

Mr Fletcher said he had given the company enough consultation to ensure it was “substantially familiar” with the terms being offered.

The Australian reported last Thursday that a row over the terms of the deal threatened to put the plan in jeopardy, given the government is counting on the infrastructure project to boost the wider Sydney economy.

Sydney Airport’s allies have criticised the idea of leaving it to the government to build the project, given this could be a “nationalisation” of an airport after years of privatisations.

Sydney Airport Holdings, the company with first rights to bid for the Western Sydney Airport project, said the government’s recent change in approach made the development “a challenging investment proposition”.

“Given the significant challenges the project will face, Sydney Airport has consistently states that the project would require material support from the Commonwealth to make it commercially viable,” the company said in a statement.

Mr Fletcher this morning ruled out direct government funding for the airport.

Sydney Airport chief executive Kerrie Mather said the company was now undertaking an evaluation of the project, including investment returns.

However, she said Sydney Airport believed it was entitled to a nine-month consideration period while Mr Fletcher this morning said the company would have four months to decide whether to take up the project or not.

“The Commonwealth needs to be focused on is what’s in the national interest, what’s in the interest of taxpayers, what’s in the best interest of the people of Sydney and the people of Western Sydney and the need for aviation capacity and the need for convenient air transport options, ” said Mr Fletcher.