First Istanbul, now Sydney. Another commercial capital city is planning to build a new airport as London continues dragging its feet. Australian Prime Minister Tony Abbott announced on Tuesday that Sydney would be getting a second airport, to the west of the city at Badgerys Creek, to cope with a projected rise in demand for passenger journeys in the area from 40 million in 2012 to 165 million by 2060.
Interestingly, the way the Australian government is choosing to cope with this demand is rather different from that being proposed for London.
Instead of expanding the existing major hub airport (as has been proposed for Heathrow) or building a new mega-airport at vast cost (as London mayor Boris Johnson insists), they intend to build a relatively small airport with just one runway and most likely one terminal (as per recommendations in this report), with a maximum capacity of about 35 million passengers. That wouldn’t be enough to deal with the long-term projected demand, but the government expects the new airport to be expanded in response to that.
The initial cost of this new airport? A total of around A$2.4 billion in 2012 dollars (about £1.55 billion in 2013 sterling), the government claims. That compares rather favourably with the £96-122 billion which Boris is asking for the first phase of his two airport proposals, at the Isle of Grain and outer Thames Estuary respectively, as I blogged here.
This approach means that the initial, upfront cost of setting up the airport can be more easily shared between the public and private sectors. It also means that, once the airport was serving tens of millions of passengers a year, it could be expanded largely if not entirely on the private sector balance sheet. The existing cash generation would reassure financiers and reduce the risk involved in getting the private sector to support the project. Spreading out expansion over, say, 20 years would allow it to be financed with a rolling programme of debt issuances.
By example, Melbourne Airport to the south is spending A$10 billion, on its own balance sheet, on an expansion plan between now and 2033, including a third runway, to support passenger growth from 30 million passengers last year to just under 65 million.