Speech to the Committee for Sydney - Western Sydney Airport
I am very pleased to have the opportunity to speak to you today about Western Sydney Airport.
This is a vital project and the Turnbull Government is working hard to meet our goal of the airport being operational by 2026.
In my remarks today I want to speak firstly about how far we have come, since the Coalition Government took the decision in 2014 to build Western Sydney Airport at Badgerys Creek.
Secondly I want to remind you about the ‘size of the prize’ here – the benefits we will secure for Western Sydney, for Sydney and for the nation by delivering Western Sydney Airport.
In the third part of my remarks today I want to speak about the decision which Sydney Airport Corporation will shortly make in responding to the ‘Notice of Intention’ which was issued to it just before Christmas – and the Turnbull Government’s plans in either scenario.
How Far We Have Come
Let me start by reminding you how far we have come. Just five years ago, the Sydney Morning Herald ran a series of articles on the question of a second airport for Sydney, with headlines like “Airport debacle stuck in eternal holding pattern” and “Airport chaos imminent but the cockpit's vacant”.
The author, Lenore Taylor, described it as “a decades-long story of political myopia and cowardice” and noted the difficulties then Transport Minister Anthony Albanese faced on the issue following the Labor’s 2003 decision to rule out an airport at Badgerys Creek.
Thankfully, the Coalition Government in 2014 took the decision to site the new Western Sydney Airport at Badgery’s Creek. Since that time we have been working hard to turn the decision into reality.
Any project of this scale involves an enormous amount of detailed process work.
We issued a draft environmental impact statement in 2015 – some 5,000 pages, which attracted several thousand submissions.
The final EIS was presented to the Minister for the Environment in September last year and following his review the Minister found that the development could proceed, subject to a suite of more than 40 strict environmental conditions dealing with issues like water quality, flight paths, fuel delivery and biodiversity.
In December last year the Prime Minister and I announced determination of the Airport Plan – the formal legal document under the Airports Act which grants authority to build and operate an airport at the Badgerys Creek site.
The Airport Plan sets out key aspects of the airport’s design, including a 3,700 metre runway capable of carrying the largest commercial passenger aircraft such as the A380 and the latest generation 747, and a terminal with capacity for ten million passengers a year.
Over the past three years we have worked hard, in close co-operation with the New South Wales government, to ensure that the new airport will have first-class ground transport connectivity.
Under the $3.6 billion Western Sydney Infrastructure Plan, jointly funded by the two governments, we are making The Northern Road four lanes all the way, upgrading Bringelly Road, and building a new M12 motorway that will connect the airport to the M7 and the Sydney motorway network.
The two governments are well advanced on a scoping study into the rail needs of Western Sydney and the airport: what is the right route, when should it be built, how much will it cost and how should it be funded?
The discussion paper issued last year has generated considerable interest. When the scoping study reports to the two governments later this year we will have more to say about the way forward.
We have also announced that there will be a ‘Western Sydney City Deal’ between the federal and state governments and local councils, with the airport as its centrepiece. The city deal will also allow us to work on employment, housing, economic development and other outcomes of interest to all levels of government.
There is physical work underway at the Western Sydney Airport site now, as we carry out environmental monitoring which is required under the Airport Plan.
We are also ensuring the site is completely empty so that it is ready for construction. The land has been owned by the Commonwealth since the 1980s, but for many years there were tenants with homes and businesses there. The vast majority have now left and the structures have been demolished. Only a handful now remain and we are optimistic that a completely vacant site will be achieved soon.
An important part of our agenda has been consulting with the Western Sydney community about plans for Western Sydney Airport. Just last week, I announced the formal establishment of the Forum on Western Sydney Airport (FOWSA.)
This will be chaired by Professor Peter Shergold AC, Chancellor of Western Sydney University. He is joined by 22 other representatives of communities and stakeholder groups, drawn from right across Western Sydney.
FOWSA will be a critical community consultation mechanism in the lead up to the airport commencing operations in 2026.
We have put a lot of effort into tracking community sentiment concerning Western Sydney Airport. According to our most recent data, over 80 per cent of people in Western Sydney support or are neutral to the new airport.
This data is supported by the feedback I received when, earlier this year, I met individually with all of the councils in the areas surrounding the airport: Blacktown, Blue Mountains, Camden, Campbelltown, Fairfield, Liverpool, Penrith and Wollondilly.
While some councils maintain a formal position of opposition to the airport, that is not the majority sentiment which I detected in these meetings.
On the contrary, most mayors, councillors and senior council staff I met believe that Western Sydney Airport is definitely going ahead; they see clear economic benefits for Western Sydney; and they expressed a desire to work with the federal and state governments to capture those benefits for their community.
Since our 2014 decision one of the most important strands of work has been the Government’s consultation with Sydney Airport Group, the publicly listed company which owns Sydney’s Kingsford Smith Airport.
As part of that airport’s sale in 2002, the new owners were granted a right of first refusal to develop and operate a second Sydney Airport.
We have carried out a very thorough consultation process, with over one hundred meetings, in accordance with the processes specified in the right of first refusal documentation.
That process culminated in the issue to Sydney Airport Group, in December last year, of the Notice of Intention. This is a detailed set of documents, some one thousand pages in length, setting out the terms on which Sydney Airport Group, if it chooses to accept the Notice of Intention, will build and operate Western Sydney Airport.
Size of the Prize
Before I say a bit more about the Notice of Intention I want to spend a few moments talking about the ‘size of the prize’ which Western Sydney Airport represents.
There are three profound public policy benefits I want to highlight.
Extra Aviation Capacity
The first is the new airport’s importance in providing additional aviation capacity for Western Sydney, for Sydney and for the nation.
On the one hand, demand for aviation capacity into Sydney is rising sharply. On the other hand we face a fundamental capacity constraint at Kingsford Smith Airport – so that if we do not take action we will simply run out of capacity.
This issue was carefully examined in the Joint Study on aviation capacity in the Sydney region which reported in 2012. The study found that by 2027 all slots at Kingsford Smith will be allocated, meaning that new airlines and services could not be accommodated at Sydney Kingsford Smith unless another service was cancelled.
It also found that by around 2035 there will be practically no scope for further growth of regular passenger services at Sydney Kingsford Smith.
Passenger numbers at Kingsford Smith are rising strongly, up 5.6 per cent in calendar 2016 to exceed 41 million passengers. [1]
This is consistent with the projections of the Joint Study, which saw passenger numbers reaching around 87 million passengers in the year 2035, and then doubling again by the year 2060.
It is also noteworthy that in the period since 2012, there has been little evidence of up-gauging – that is, replacing smaller aircraft in some slots with larger aircraft – as a means of providing extra capacity. Certainly, this has not materialised to the extent that Sydney Airport Group projected in the 2013 Master Plan for Kingsford Smith Airport.
It is clear that if we fail to progress with Western Sydney Airport, the missed economic opportunity will be substantial – the economic modelling suggests some $34 billion in foregone Gross Domestic Product by 2060. [2]
Economic Benefits for Western Sydney
The second public policy benefit from Western Sydney Airport is the economic benefits it will bring to Western Sydney.
Western Sydney is the fourth-largest city and third-largest economy in Australia, and is growing fast.
Already two million people call Western Sydney home, and that will increase by another million people in the next 20 years.
As the Committee for Sydney notes in a recent paper, there is a significant jobs gap in Western Sydney. Most knowledge based, or high-value jobs are located in the east.[3]
Deloitte has identified that a third of Western Sydney workers – more than 300,000 people – travel outside Western Sydney for work each day.[4]
Helping to bring more jobs to Western Sydney is a key reason to locate an airport there.
Airports are proven job generators. Western Sydney Airport will generate nearly 9,000 direct jobs by the early 2030s and 60,000 jobs in the long term.
In addition, thousands of jobs are likely to be created at the businesses which will be attracted to locate near the airport.
Typically the majority of people who work at an airport live nearby. At Kingsford Smith Airport, for example, around eighty per cent of workers live within a 30-minute distance. [5]
Another good example is Gatwick Airport in London. 84 per cent of those employed at Gatwick live in a ‘core employment zone’, which is made up of the 14 local government areas surrounding the airport. [6]
Over a third live in Crawley, the local government area the airport is located in. The people living in this area and working at the airport earn, on average, more than those who don’t work at the airport; in other words, the airport brings high-value jobs. [7]
The Turnbull Government, working with the Berejiklian Government, wants to do more than simply build an airport. We want to take advantage of the city shaping capability of this major infrastructure.
As the Chair of the NSW Government’s Greater Sydney Commission, Lucy Turnbull, has spoken about, the new airport will be key to the creation of a third city in Greater Sydney. The vision is for three cities – the East, the Central City in Parramatta and the Western City – with Western Sydney Airport as a central economic and employment hub for this third city. [8]
Many see this as a potential ‘aerotropolis’ – defined as “a metropolitan sub-region whose infrastructure, land use, and economy are centred on an airport.” [9]
The Commonwealth and NSW Governments are working together on this vision. This includes an approach to land use planning which will deliver the right mix of industry and commercial development around the airport.
It is very instructive to see the range of businesses and institutions which are making plans to open, to expand or to re-locate so as to take advantage of the airport.
These include universities such as Sydney University, Western Sydney University and Wollongong University
Other examples include the new ‘Sydney Science Park’ at Luddenham which I visited recently.[10]
The leadership team at the Westmead hospital campus have a strong interest in the global connectivity the new airport can offer.
A new 275 room luxury hotel has been announced for the Twin Creeks resort in Luddenham. This is a good reminder of the boost to tourism that the new airport will bring.
The 2014 Deloitte report on the economic impact of Western Sydney Airport noted projections for inbound tourism to Australia from China to rise 7.2 per cent a year over the period to 2020. Indian visitor arrivals are expected to rise 8.5 per cent a year. [11]
Western Sydney Airport will provide a new way to structure holidays and tours, providing an arrival/departure point for an iconic Sydney tourist experience, including both the east and west – from the beach to the bush.
The Opera House and Bondi Beach will always be part of the itinerary, but it is not hard to see how the new airport will increase the numbers of people able to enjoy unique tourism experiences available in the west of Sydney through to the Blue Mountains and the Southern Highlands.
Certainly local tourism operators expect significant benefits. For example, the owners of Katoomba’s long established Scenic World have said the airport will deliver tourists “to our doorstep”. [12]
Better Access to Air Travel for Western Sydney
A third important benefit is that Western Sydney Airport will give better access to air travel for two million people, for whom it will be a closer option than Kingsford Smith Airport.
It is certainly time that Western Sydney has an airport of its own, when we consider that Canberra, the Gold Coast and Adelaide all have full service airports, despite having markedly smaller populations than Western Sydney.
Air fares today are much lower than they used to be – so Australians fly more than ever. In 2016 there were around four times as many passengers taking flights in Australia as thirty years ago. [13]
Air travel is not a luxury or a rarity – it is part of the ordinary lives of everyday Australians.
But if getting to the airport costs you a lot of time and money, you miss out on much of the benefit of lower airfares.
As one airline executive told me – his airline offers $69 airfares to Melbourne, but some customers travelling from Western Sydney are paying $180 in taxi fares.
That is a key reason why Western Sydney Airport is so important.
It will end the unfair situation where people in Western Sydney have much poorer access to their nearest airport than people in other parts of Sydney, and other cities of Australia.
Next steps in delivering the airport
Let me turn therefore to the Turnbull Government’s next steps for Western Sydney Airport, particularly as we await the response from Sydney Airport Group to the Notice of Intention.
The Government has said that Sydney Airport Group has until 8 May to inform us of its response. Pleasingly, the Chief Executive of Sydney Airport Group, Ms Kerrie Mather, said in February that the company was planning to respond by the deadline.
Can I take a moment to make it clear that the Turnbull Government absolutely respects Sydney Airport Group’s legal rights under the Right of First Refusal. We also fully understand that the board and management of Sydney Airport Group need to take a decision in the interests of their investors – indeed they have a fiduciary duty to do so.
I have personally appreciated the methodical and business-like engagement from Sydney Airport Group with the government as we have worked through the consultation process.
If Sydney Airport Group accepts the Notice of Intention, the position from here is very clear: they will build and operate Western Sydney Airport.
That is their clear legal entitlement and the Turnbull Government will be pleased to work with them to achieve our collective ambitions for Western Sydney Airport.
Our working relationship will be governed by the terms of the Notice of Intention.
It sets out strict governance and project timeframes for design and construction procurement, construction and delivery, and clearly sets out the consequences of not achieving these.
If Sydney Airport Group develops the airport, the Government’s role would therefore be to ensure that development occurs in a timely manner and in full compliance with the requirements of the Notice of Intention, the Airport Plan and other elements of the regulatory and contractual framework.
Let me now turn to describe our path forward should Sydney Airport Group choose to reject the Notice of Intention.
As I have previously stated there are two options open to the Government in this scenario.
The first would be for the government to build and operate the airport itself.
The second would be for the government to go to market to choose another private sector party to build and operate the airport.
Let me point out that the terms of the Notice of Intention remain highly relevant in any scenario.The reason is that the Government must make sure that the terms we offer any other party – including ourselves – to build and operate Western Sydney Airport must not be ‘materially more advantageous’ than those offered to Sydney Airport Group in the Notice of Intention.
For example, under the Notice of Intention Sydney Airport Group is required to build an airport with a 3,700 metre runway and a terminal with capacity for 10 million passengers a year and have it operational by 2026. Anybody else to whom the Government grants the right to build the airport must similarly meet this requirement – and in turn incur the necessary capital expenditure to do so.
So the terms of the Notice of Intention are very important – whether Sydney Airport Group takes up the opportunity, or not.
The Government developed these terms to ensure that Western Sydney would have the airport it needs. Those needs have not changed and we are committed to progressing the airport on those terms.
No matter who develops the airport it is our strong expectation that they will draw on world class private sector expertise. This airport is not going to be designed by public servants in Canberra!
As the government weighs up its options, a key focus will be the importance of continuing to move forward to achieve the timetable that the Turnbull Government has set – for works onsite to commence before the end of 2018 and for the airport to be operational by 2026.
There has been a lot of contingency work done over the past few months to deal with the different possible scenarios.
The end goal is the same in all of the scenarios – for Western Sydney Airport to be operational in 2026.
If Sydney Airport Group accepts the Notice of Intention, then it will be the party contractually charged with achieving that outcome – and in turn it will gain ownership of a substantial new asset under a 99 year lease.
If it does not accept the Notice of Intention, the Turnbull Government is ready – and we have done a lot of work so that we can ensure our timetables are met.
In the last few weeks, I have joined with Commonwealth officials to meet with representatives of nine large construction companies as part of our contingency planning work. I am personally very confident that there is strong interest this project from the construction sector.
Let me again reiterate that the ball is entirely in Sydney Airport Group’s court. If it accepts the Notice of Intention, it will build and operate the new airport – and it will manage the procurement process to determine which construction companies win the design and construct contract.
But if Sydney Airport Group declines to accept the Notice of Intention, we are ready to move to the next stage on this project in a timely fashion. If that scenario eventuates, you can expect a clear indication from the Government of the next steps we will be taking within a short timeframe after Sydney Airport Group announces its decision.
The importance of this project, and of achieving the timeline we have set, demands nothing less.
Conclusion
Let me conclude by reiterating that Sydney Airport Group has the right of first refusal to build and operate Western Sydney Airport. The Turnbull Government has taken scrupulous care to comply with Sydney Airport Group’s rights. If it decides to accept the Notice of Intention, we will work co-operatively with Sydney Airport Group as it develops this new airport.
Let me however also assure you that we have been working hard to prepare for the other scenario. The Government will have more to say once we know what Sydney Airport Group decides to do. But let me leave you in no doubt: either way, we will be getting on with the job of delivering this new airport for Western Sydney, Sydney and the nation.
[1] Sydney Airport, February 2017. http://www.sydneyairport.com.au/investors/~/media/files/investors/news%20and%20events/syd%20asx%20releases/2017/2%20170216asx%20release%20final%20%2015%20february%202017.pdf
[2] Joint Study on Aviation Capacity in the Sydney Region 2012, p. 5 http://westernsydneyairport.gov.au/sydney_av_cap/index.aspx
[3] Committee for Sydney. 2017. Adding to the Dividend, Ending the Divide. http://www.sydney.org.au/wp-content/uploads/2015/10/CfS-Issues-Paper-14-Adding-to-the-Dividend-Ending-the-Divide-3-1.pdf
[4] Deloitte. 2015. Shaping Future Cities: Designing Western Sydney
[5] Robert Freestone and Andrew Tice. 2013. “Airports as Development Generators: A reconnaissance of employment trends in the Sydney airport region 1996-2011.” State of Australian Cities Research Network.
[6] Gatwick Airport Limited. Employment and Skills Research 2015-2016.https://www.gatwickairport.com/globalassets/documents/business_and_community/2016-07-29-gatwick-employment-and-skills-research-final.pdf
[7] Gatwick Airport Limited. Employment and Skills Research 2015-2016.https://www.gatwickairport.com/globalassets/documents/business_and_community/2016-07-29-gatwick-employment-and-skills-research-final.pdf
[8] Greater Sydney Commission https://www.greater.sydney/three-cities
[9] Kasarda, John D. 2015. A Western Sydney Aerotropolis: Maximising the benefits of Badgerys Creek
[10] Celestino, Sydney Science Park. http://www.celestino.net.au/sydneysciencepark/residential
[11] Economic impact of a Western Sydney Airport – Deloitte Access Economics, 2014, p.11
[12] The Australian, Budget 2016: Aviation and rail links to boost tourism. Published 4 May 2016. http://www.theaustralian.com.au/budget-2016/budget-2016-aviation-and-rail-links-to-boost-tourism/news-story/332fff18b2dc1fcb8cc28c368609d404
[13] Bureau of Infrastructure, Transport and Regional Economics Domestic airline industry annual summaries 1984-85 to 2015-16. https://bitre.gov.au/publications/ongoing/domestic_airline_activity-time_series.aspx
Total Revenue Passengers 1985-86: 14,798,619
Total Revenue Passengers 2015-16: 58,324,510
