Transcript—Press Conference, Sydney
20 December 2016
Subject: Western Sydney Airport
Paul Fletcher: The notice of intention sets out the terms on which Sydney Airport Group would build Western Sydney Airport. For example, it sets out there needs to be a 3,700 metre runway, there needs to be a terminal capable of meeting the needs of 10 million passengers a year, the airport needs to open by 2026 and earth-moving works need to commence by late 2018.
The Notice of Intention is provided under the terms of the right of first refusal which is held by Sydney Airport Group, and that right of first refusal was granted when Kingsford-Smith Airport was privatised in 2002. Now under the terms of the right of first refusal there's a requirement for the Commonwealth to carry out extensive consultation with Sydney Airport Group and we've certainly been doing that over the last two years with more than 100 meetings between Commonwealth officials and Sydney Airport Group. We've provided successive drafts of the legal documentation, this 1000 page plus set of documents.
It's now a matter for Sydney Airport Group as to whether they accept the Notice of Intention and the contractual terms embodied in it. If they do accept the Notice of Intention then a contract is formed which is legally binding on the Commonwealth and on Sydney Airport Group. Now under the terms of the right of first refusal, now that the Notice of Intention has been served, Sydney Airport Group has four months to accept the Notice of Intention if they're substantially familiar with its contents and the Commonwealth is satisfied—based upon the extensive consultation process, based upon the successive drafts of the documents that have been provided—that Sydney Airport Group is substantially familiar with the terms of the Notice of Intention. Of course because we're just coming up to Christmas we're going to add in a couple of weeks to that period to allow for Christmas and the holiday period, so the Notice of Intention period will expire in around mid-May. So Sydney Airport Group will have until around mid-May to accept the Notice of Intention, should they decide to do so.
Now, if the Notice of Intention is accepted what that will do is grant Sydney Airport Group a 99 year lease over the Western Sydney Airport site at Badgerys Creek. Of course in addition to the contractual rights that Sydney Airport Group would get, they'll also have the benefit of the regulatory approvals which the Commonwealth has been focused on providing including the Environmental Impact Statement and of course, the final airport plan—which was approved last week—which gives the regulatory approval to build an airport at the Badgerys Creek site.
There is no financial support, no direct financial support, from the Commonwealth provided towards the cost of building and operating Western Sydney Airport under the contract, the proposed contract set out in the Notice of Intention, but of course what Sydney Airport Group would be getting is the valuable opportunity to operate an airport at Badgerys Creek, Western Sydney Airport at Badgerys Creek, and to receive all of the revenue from that airport over the 99 year period that the lease will extend for.
The Turnbull Government is very committed to getting Western Sydney Airport built and operational by the mid-2020s. 2016 has been a critical year to get the key regulatory and contractual pre-conditions in place. The final Environmental Impact Statement was issued in September 2016, the final airport plan was approved earlier this month, and now the Notice of Intention is being issued to Sydney Airport Group. And it's now a question for Sydney Airport Group if it decides to accept the Notice of Intention; it will build and operate Western Sydney Airport consistent with its right of first refusal. Of course, if Sydney Airport Group should choose not to accept the Notice of Intention then under the right of first refusal documentation the Commonwealth is free to either build Western Sydney Airport itself or to go to another private sector partner on substantially the same terms as we have offered Sydney Airport Group under the Notice of Intention. Though naturally we are doing contingency planning for these outcomes, but I reiterate, if Sydney Airport Group accepts the Notice of Intention it will build and operate Western Sydney Airport. The Turnbull Government is committed to delivering Western Sydney Airport and having it operating by the mid-2020s. Today's delivery of the Notice of Intention to Sydney Airport Group is yet another important milestone towards delivering Western Sydney Airport.
Question: You said no direct financial support, is there any indirect financial support? Is the Commonwealth committing to pay for some elements of the actual project?
Paul Fletcher: Well there's a number of ways in which the Commonwealth is supporting the project. We've provided, of course, the airport site at Badgerys Creek, over 1700 hectares of land, under a 99 year lease; that's what will be formed if Sydney Airport Group accepts the Notice of Intention. We have provided the relevant regulatory approvals, of course that's required considerable time, energy and expense to get to the point where the final airport plan was approved last week. Of course, we are also spending $3.6 billion, the New South Wales and Commonwealth Governments jointly, on the Western Sydney Infrastructure Plan and so that is the ground transport connectivity upgrading of the Northern Road to four lanes all the way to the new M12 Freeway that will extend from the existing M7 to the airport and therefore will join Western Sydney Airport into Sydney's motorway network.
So in a whole range of ways the Commonwealth is supporting the project. Of course, we committed over $100 million in last year's Budget towards preparatory activities, including for example planning towards making the airport rail ready. That means that there will be a station box and excavation in which a station would be built and the corridors for the rail will be reserved across the airport site. So in a whole range of ways the Commonwealth is providing financial support towards the delivery of this product, but the point I'm making is that in the terms of the Notice of Intention there is no specific additional financial support being provided to Sydney Airport Group.
Question: If it's too onerous, if it's too onerous for Sydney Airport Group does that really seem to suggest that maybe another country would want to take up the contract with the same terms?
Paul Fletcher: Well the first point I'd make is that the immediate step now is for Sydney Airport Group to consider the Notice of Intention. It needs to do that, its Board of Management needs to do that, having a regard to their responsibilities and their duty to act in the best interests of investors in Sydney Airport Group. At the same time of course what 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 interests of people of Sydney and people of Western Sydney and the need for aviation capacity and the need for convenient air transport options. So Sydney Airport Group will of course consider the Notice of Intention on its merits. If Sydney Airport Group accepts the Notice of Intention then Sydney Airport Group will build and operate the airport. Naturally though, the Commonwealth needs to be in a position where we're considering contingencies, should Sydney Airport Group not accept the Notice of Intention and as I've mentioned under the right of first refusal, that includes the Commonwealth building itself or another private sector party and so that is an option for the Commonwealth. We're focused on getting an airport open and operating by the mid-2020s and delivering the Notice of Intention to Sydney Airport Corporation today is another key step in that.
Question: After 100 odd meetings, what's your view? Is Sydney Airport likely to take up the option on these terms?
Paul Fletcher: Well look, it is entirely a matter for Sydney Airport Corporation and of course they do need to make a decision based on what they determine is in the best interests of their investors. What I would simply say is we've worked very hard with Sydney Airport Corporation. I do want to acknowledge the amount of time, effort and expertise that Sydney Airport Corporation have put into this process. We've worked very hard with them so that what we have is a comprehensive suite of documents that deal with all the matters that need to be dealt with in a project of this scale and complexity. So the Commonwealth has worked to make sure that what we are delivering Sydney Airport Corporation today is something that is capable of contractual acceptance. That means by signing a notice back to the Commonwealth, Sydney Airport Corporation can accept the contract, accept the Notice of Intention and then what is formed is a comprehensive contract, dealing with all the various matters. So the lease itself, a deed which regulates or sets out all of the things that need to occur in the timeframes by which they need to occur. So the Commonwealth certainly, the Turnbull Government certainly believes that what we've provided Sydney Airport Corporation is a very comprehensive document, developed over, as I say, some two years of close consultation between the Government and Sydney Airport Corporation that addresses all of the matters that need to be addressed so that this comprehensively sets out what you need to agree on to take forward a project of this scale but it is now a matter for Sydney Airport Corporation and their board and management.
Question: Is a monopoly healthy in this situation?
Paul Fletcher: Well I—look, the issue before the Turnbull Government and the issue before me as Minister for Urban Infrastructure is what are the steps we need to take to achieve the objective of getting an airport in place and operational by the mid-2020s. And so one of those steps has been an Environmental Impact Statement, draft issued last year, final issued this year, following extensive community consultation. Another of those steps has been the regulatory approval to build the airport so the airport plan itself, another of those steps in a strand of work that will continue over quite a number of years will be the detailed flight path planning involving Air Services Australia, Civil Aviation Safety Authority, extensive consultation with airlines, extensive consultation with communities. So all of that has to happen. Now the right of first refusal, which Sydney Airport Corporation has the benefit of, is something that the Commonwealth needs to scrupulously comply with, we are scrupulously complying with it, we have put to Sydney Airport today a Notice of Intention; it really is now a matter for Sydney Airport Corporation.
Question: Your hands are tied, obviously. At the end of the day we've got a potential situation where these two airports are going to be operated by one owner. A lot of people think that's simply unhealthy. What do you think?
Paul Fletcher: Well, what I think is that the Commonwealth, the Turnbull Government needs to get on with doing the work that is necessary to deliver Western Sydney Airport by the mid-2020s, that's what we are focussed on. 2016 has been a year of a number of significant milestones being achieved, final Environmental Impact Statement, final airport plan approved, now the Notice of Intention issued to Sydney Airport Corporation so we're focussed on the things that we need to do to get an airport delivered.
Question: Do you have a final cost or an estimated cost on what this airport will take to build and is it unusual for the Federal Government to be not putting direct funding into the airport?
Paul Fletcher: Look, the cost estimate is $5 billion to $6 billion for Western Sydney Airport. In terms of whether it's unusual or not, I'd make the point that all of the major airports around Australia are privately owned. Not just Kingsford Smith Airport in Sydney, but Brisbane, Melbourne, all of the major airports are privately owned following policy processes in the ‘90s, and if you take for example Brisbane Airport, that airport is currently investing over $1 billion in a new runway that will be operational by around 2020. All of that is private sector capital. So, no, in the airport sector it’s not unusual at all, and indeed that is very much the policy framework that applies to the major airports around Australia.
Question: Another airport to look at is Avalon which has been a disaster. Do you fear that Western Sydney could become the same?
Paul Fletcher: I think there's a whole series of reasons why Western Sydney Airport is very important and why there are good reasons to be confident about the business case assumptions which are that the airport will start with about three million to five million passengers a year and will rise to around 10 million passengers by the early 2030s, therefore, at that point, being about the same size as an Adelaide Airport and then growing over time to a point by around 2050 where it is likely there will need to be a second runway built and that's all being provided for. Now what are the reasons to be confident of that? The first is the airport has a catchment area of some two million people who will be closer to Western Sydney Airport than to Kingsford Smith Airport. The second is that over the next 20 years, there is expected to be another million people who will be living in Western Sydney. So it's a large area now and a growing area so the airport has a very distinct catchment.
Now another very important factor which was examined carefully in the Joint Study into the Aviation Needs of Sydney and it was done under the previous government and reported in 2012 was to look at what is the capacity that's available for Kingsford Smith Airport and what are the needs of Sydney and of the nation for aviation capacity in Sydney. I say of the nation because at the moment about 40 per cent of international arrivals into Australia come through Sydney so this is a very important gateway for the whole nation. Now the study that I've mentioned found that there would be no additional slots available at Kingsford Smith Airport by 2027 and by the mid-to-late 2030s there will be no additional capacity even through what's called up-gauging where smaller aircraft are replaced with larger aircraft. So there is a clear need for additional aviation capacity in Sydney.
Earlier this year, I had the opportunity to visit a number of international airports and speak with their chief executives or management teams: Changi Airport in Singapore, Incheon Airport in Korea, Heathrow, Gatwick, and Luton in London, and Schiphol in Amsterdam. And a very clear and consistent message from those airport management teams and a clear and consistent message from airport management teams in Australia is that we are seeing strong continued growth in aviation, in passenger numbers, and that's driven by GDP growth; it's driven by continuing growth in the wealth of countries in our region, in particular China, India, and other countries, which is generating substantial additional traffic all around the world. But certainly, here in Australia we are seeing that very significantly. And of course, the continued growth of low-cost carriers and the fact that the amount of air travel that Australians are doing is growing all the time, and therefore, for all of these reasons, the business case that's been developed for Western Sydney Airport lays out a very credible growth path which takes advantage of or responds to a number of these factors, and some of the particular advantages that Western Sydney Airport will have and particularly that catchment area.
Question: Where is the Government going to get $6 billion from?
Paul Fletcher: Well certainly, as you'd imagine, we have contingency planning underway should Sydney Airport not accept the Notice of Intention. I make the point it is entirely a matter for Sydney Airport Group. If it chooses to accept the Notice of Intention, it will build and operate Western Sydney Airport. But in terms of the scenarios if that doesn't happen, then obviously we have contingency planning in place and we certainly have the capacity to fund it.
Question: [Inaudible question].
Paul Fletcher: We certainly have the capacity to fund it if we need to.
Question: If that doesn't happen, will you still meet your 2026 deadline?
Paul Fletcher: Yes. We are committed to meeting 2026, to having Western Sydney Airport operational by 2026, and the timeframes that are in place, certainly that will not be compromised should Sydney Airport Group choose not to accept a Notice of Intention. And clearly if Sydney Airport Group does accept a Notice of Intention, then we've laid out a very clear series of timelines in the Notice of Intention and the contractual documentation.
I'd make the point, by the way, that we're not on- we're not in any way waiting or holding off on critical activities in relation to the airport while we work through this process with Sydney Airport Group. So for example, at the moment there's demolition work continuing on the site. Most of the existing premises on the site have been demolished, but there's some continuing work. There's geotechnical survey work occurring just this week. Over the next couple of years, there's a high voltage transmission line that needs to be undergrounded. That's a major piece of work. The Northern Road, which presently cuts across part of the airport site, needs to be realigned, and that will occur as part of the upgrading of the Northern Road under the Western Sydney Infrastructure Plan over the next couple of years. There's about a year's worth of detailed groundwater monitoring that we need to do before construction can commence under the terms of the Environmental Impact Statement to build on the groundwater monitoring that's already been done, and that will be occurring over the next 12 months. So there's a lot of strands of activity that are continuing over the next 12 months or so while we work through this process with Sydney Airport Corporation.
Question: Can I ask why the Federal Government made the decision to not put any direct investment into the airport, given that it is a critical piece of infrastructure, as you say, given that their [inaudible] coming off Sydney Airport itself? This is a bit of a tough ask for Sydney Airport Corporation, $6 billion, isn't it?
Paul Fletcher: Well, Sydney Airport Corporation, under the terms of the Notice of Intention is being given an economic opportunity to own and operate an airport for 99 years on a piece of land, over 1700 hectares, which the Government would provide to it with all of the regulatory approvals in place—so the Airport Plan now approved—and of course, to operate an airport in a part of Sydney where as I've mentioned there's a catchment area of some two million people who'll be closer to this airport than to Kingsford Smith Airport; population in that area growing very strongly in a country which is enjoying continued economic growth, and part of the dynamic Asian region.
So this is a very significant economic opportunity. It is a question for Sydney Airport Group as to whether it wants to make the capital investment that is required to, for example, build a runway of 3700 metres, to build a terminal capable of 10 million passengers. That's a question for Sydney Airport Group. But what the Turnbull Government needs to do obviously is take a decision which is in the best interests of people who need to use aircraft, aviation customers, that's in the best interests of taxpayers, that's in the best interests of the nation. We believe that this is the best and appropriate way forward, and we now look forward to Sydney Airport's careful consideration of the Notice of Intention.
Question: Is it essentially [indistinct] problem for you guys? Do you not have the revenue to do it?
Paul Fletcher: That's absolutely not the issue. The issue is what are the appropriate terms which should be offered to a privately-owned company for the chance to take up this valuable economic opportunity. So they have a contractual right of first refusal. The Commonwealth has scrupulously honoured that. We are putting to them a very comprehensive and detailed set of contractual terms. It is an opportunity which they can now consider, and the Commonwealth and Turnbull Government has carefully considered do we want to provide additional financial assistance beyond the very extensive support already being provided in terms of a 1700 hectare site that's available to them, the regulatory approvals that have been provided, the extensive public funding of the ground transport connectivity, the money in last year's budget towards the rail planning and all the other things that we're already putting work into. And the judgment that we've made is the appropriate terms are the ones contained on the Notice of Intention, and it's now a question for Sydney Airport Group as to whether it chooses to take up that Notice of Intention. As I say, they've got four months to do so, through to about mid-May next year.
Question: Minister, just one more on the monopoly issue. There's been- over the years, there's been so much criticism of how expensive everything is at Sydney Airport. So what hope do you have that those complaints will stop if the same group operated the Western Sydney Airport, especially given the Commonwealth won't contribute?
Paul Fletcher: Well, again, what the Turnbull Government needs to do in relation to Western Sydney Airport is deliver the vital regulatory and contractual preconditions. One of those is issuing the Notice of Intention to Sydney Airport Group, who have a right of first refusal. After some two years of detailed consultation, many successive drafts of documents, we are today issuing the Notice of Intention to Sydney Airport Group, and they now have a contractual right. If they choose to take up the Notice of Intention, they will build and operate the airport. Alternatively, the Commonwealth has, under the right of first refusal, the option to build it itself or to go to another private sector party on substantially the same terms as this Notice of Intention. So what we're focused on is what we need to get done to get the airport delivered by the mid-2020s. Thanks very much.