One is Australia’s business capital, the other the play capital. One has 5m inhabitants, the other 3.5m. One covers 12,500km2, the other 22,500km2. One has one airport, the other four. And one has built no new runway in the past 20 years, the other is building three. The contrast couldn’t be starker.
One is Sydney but the other isn’t London, New York or Paris – some of the more famous multi-airport cities. It’s the Greater Brisbane region known locally as South East Queensland (SEQ).
The politically charged debate over the potential construction of a second airport for Sydney rages on and on seemingly ad infinitum (as it has done ever since the Major Airport Needs of Sydney – MANS – study in 1975) and while Sydney fiddles, SEQ just got on with the job of developing its airport system.
SEQ has four airports – Brisbane with 22.6m passengers, Gold Coast with 6.4m, Sunshine Coast with 1m and the newly opened Brisbane West with 0.2m. As a region SEQ generates a total of 30.2m airport passengers from a population base of 3.4m. That’s 8.9 passengers per head of population.
By contrast, Sydney – Australia’s largest, richest and most international city and the gateway to the country – has one airport accommodating 42m passengers from a population base of 4.9m. That’s just 8.6 passengers per head of population.
Surprising isn’t it? Especially when you consider that international passengers at Australia’s primary gateway, Sydney, are dominated by foreign visitors while Brisbane’s international passengers are dominated by locals.
And while Sydney might, maybe, perhaps, possibly have a second airport by 2026 (based on the Federal Government’s current timetable), SEQ is investing heavily in new runway capacity now.
More than A$250m of private investment funded the new Brisbane West Airport – Australia’s first Greenfield passenger airport since Melbourne’s Tullamarine in the 1970s. Brisbane West opened in November 2014 with a 2.8km runway servicing the Toowoomba region around 125km west of Brisbane.
Brisbane Airport, SEQ’s main gateway, currently has a new 3.3km, A$1.35bn parallel runway under construction and is due to become operational in 2020.
The newly privatised Sunshine Coast Airport, just 100km north of Brisbane, recently had its proposal for a new 2.5km, A$300m runway approved by both Government and underwritten by private investors.
And while Gold Coast Airport hasn’t got a new runway, it extended its runway by 500m to 2.5km just a decade ago.
And in Sydney… still nothing … just the sound of crickets in the open fields of the land set aside for Sydney’s second airport more than 20 years ago.
That is not to say that Sydney Airport hasn’t invested in infrastructure. It has. And in a big way, with very significant investment in terminals, the airfield, car parks, roads and other infrastructure to the tune of hundreds of millions if not billions.
But no new airport to service the distant geographies and vast populations of Sydney’s fast growing west.
And no new runway capacity to service burgeoning traffic levels.
Sydney Airport is not only Australia’s busiest airport, it’s also one of the fastest growing. International traffic into Sydney Airport grew by a remarkable 8.6% in 2016.
Political will is increasing to build Badgery’s Creek Airport located about 55kmto Sydney’s West, driven by a jobs-for-the-west political agenda in a traditionally very east centric Sydney where much of the established population and wealth resides.
Under the terms of its 2002 privatisation, Sydney Airport has a first right of refusal to build and operate any new airport within 100km radius of the current airport. So when the Government issued its Notice of Intent to build Badgery’s Creek in December 2016, it gave Sydney Airport until May 2017 to respond.
So far, Sydney Airport’s CEO Kerrie Mather has called the investment in Badgery’s Creek Airport on the scale proposed by the Government (initially a single 3.7km runway and 10m pax capacity terminal) “deeply uneconomic”.
And she’s probably right. Second (and third) airports have a notorious poor financial track record as stand alone, commercially viable facilities. London Stansted took decades. Montreal’s Mirabel Airport – built in 1975 – has given up the struggle and reverted to just being a cargo airport.
Airports – particularly new ones – are as much about regional economic development and connectivity as they are about early financial viability. The development of Brisbane West Airport was as much about opening up spare land for commercial/industrial development and supporting the economic growth of its region as it was about the airport itself.
Airports require a lot of up-front investment and it takes time to build the requisite scale of traffic for commercial viability. Mather reckons it takes decades.
As a (miniscule) Sydney Airport shareholder but more importantly as an Australian taxpayer, it’s hard to ignore the “deeply uneconomic” comment – especially when you consider that despite its prime location in close proximity to Sydney’s CBD and relatively small land mass, Sydney Airport still has plenty of capacity.
Sydney Airport’s capacity is artificially constrained by archaic 25 year old regulations limiting the number of aircraft movements per hour and preserving a ring-fence of peak capacity for small regional aircraft.
These constraints are effectively based on Sydney Airport’s 1990s noise profile, which despite the more than doubling of traffic since then, has actually shrunk, thanks to the miracle of new aircraft/engine technology and ever larger planes.
Sydney Airport probably has a fair argument to suggest that these constraints should be lifted if a second airport is ever built (either by Sydney Airport or someone else) – and perhaps even if it isn’t.
Lifting the constraints on Sydney shouldn’t stop the development of a second airport for Sydney. SEQ has shown that it is possible – and most likely more favourable – to have more than one airport serving such a big population catchment.
Three of the four SEQ airports operate profitably and achieve decent returns on investment (while as a private company Brisbane West hasn’t released any financials, it is highly likely that it is not stand-alone profitable just yet).
Most importantly, it’s not a zero-sum game. A second airport for Sydney would likely grow the pie by making travel more accessible and convenient to more people. And competition could drag down prices and attract more of those low cost carriers that are buzzing around China and Asia.
So what does this mean for travel retail? Not much in the short run of course because a second airport for Sydney isn’t going to open any time soon. But it does mean plenty in the medium to long term.
Australia’s international passenger traffic has been on a long term growth trajectory – growing at more than 1.5 times the global average for the past 30 years. The more airports and airport capacity that is built, the more chance there is of this situation continuing. It’s not simply a case of “build it and they will come”. They are already coming.
And if Sydney’s second airport unleashes additional traffic growth – as additional runway capacity appears to have done in SEQ – then the upside for travel retail could be hundreds of millions of dollars in extra sales for travel retailers.
Travel retailers and brands – watch this space. Sydney’s second airport debate does have relevance for you!
The short answer is they can and soon will do so as this non-traditional revenue stream become more important to administrators and become a fund...Read More
Value Capture is a buzzword in the infrastructure world these days. Cash strapped governments seeking new ways to fund ever more expensive infr...Read More
One is Australia’s business capital, the other the play capital. One has 5m inhabitants, the other 3.5m. One covers 12,500km2, the other 22...Read More