Western Sydney Aerotropolis Summit

Speech

PFS001/2017

23 February 2017

Sydney Boulevard Hotel

I welcome the opportunity to speak at this important conference.

Why is there so much interest in the ‘aerotropolis’ vision for Western Sydney Airport?

I think it is because we all recognise the potential of Western Sydney Airport to catalyse economic activity—and to be the core of a vibrant new urban region in Western Sydney.

It is a vision which the formal definition of ‘aerotropolis’ captures well:

a metropolitan sub-region whose infrastructure, land use, and economy are centred on an airport.1

In my remarks today I want to speak firstly about the importance of this new airport for the people of Western Sydney—both those who live there today and the additional million people expected to be living in Western Sydney by 2030.2

Next I want to describe the progress we are making towards delivering Western Sydney Airport by its scheduled opening date of 2026.

In the final part of my speech I want to touch on what I see as a number of critical success factors—things we must get right if we are to capture the full benefits of the opportunity that Western Sydney Airport presents.

Importance for the People of Western Sydney

Let me turn first to why this new airport will be so important to the people of Western Sydney.

For one thing, it will redress an unfairness that exists today: if you live in Western Sydney, you are among the worst served people in Australia when it comes to air travel.

You face a long, expensive journey to get to Sydney's only airport offering scheduled passenger services, located at the far eastern edge of the metropolitan area.

By itself, Western Sydney would be the fourth largest city in Australia. Much smaller centres—such as Adelaide, the Gold Coast and Canberra—have their own airports.

In fact, the Gold Coast's population is around a quarter of the size of Western Sydney's. Yet residents of the Gold Coast have their own airport—as well as access to Brisbane Airport an hour and a half down the road3.

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. 4

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 one reason why Western Sydney Airport, due to open in 2026, 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.

Another way the airport will be fairer for Western Sydney is the jobs it will bring.

Today nearly a third of workers who live in Western Sydney leave the area for work every day.5

Airports are proven job generators. Western Sydney Airport will bring jobs to the area—jobs that locals will be well placed to fill.

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.6

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.7

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.8

By the early 2030s there are expected to be nearly 9,000 direct jobs at Western Sydney Airport—and many more at the businesses that the airport attracts to the area.

Of course airports do have an impact on the areas surrounding them—which needs to be considered when we think about the fair treatment of Western Sydney.

Some worry that the impact of Western Sydney Airport's operations on residents in surrounding areas will be greater than the impact of Kingsford Smith Airport.

In fact, thanks to careful planning over many years, the areas surrounding Western Sydney Airport have been protected from residential development for nearly 30 years. As a result, the ends of the runway will be some ten kilometres from the nearest built up residential areas.

By contrast, there are homes just 600 metres from the east-west runway at Kingsford Smith Airport; and Australia's four most densely populated suburbs are all within ten kilometres.9

The flight paths will be carefully designed to minimise the impact of Western Sydney Airport—taking advantage of the fact that much of the surrounding area is not built up.

The government has directed that there will be no single ‘merge point’ over any residential area.

We have also directed that evening flights will be required to take off to, and land from, the south west when safe to do so—which is expected to be the great majority of the time.

This area is lightly populated, helping to minimise the impact of such flights.

Of course new aircraft are getting quieter all the time.10 Those living around Kingsford Smith endured the first generation of jets—the 707 and 727 for example—which were much louder than today's aircraft.

By the time Western Sydney Airport opens the fleet will be still quieter and more modern than today.

For too long Sydney's only airport has been right on the eastern fringe of the metropolitan area.

As the population of greater Sydney heads beyond five million, such continuing geographic discrimination cannot be justified.

The people of Western Sydney are entitled to an airport of their own—and by 2026 that is what they will have. For two million people, Western Sydney Airport will be closer and more convenient than Kingsford Smith.

Where we are up to

Let me turn then from the importance of this airport to where we are up to in delivering it.

After more than thirty years of a succession of governments putting a second Sydney Airport into the too-hard basket, it took a federal Coalition Government in 2014 to make the decision to proceed with Western Sydney Airport at Badgerys Creek.

That decision built on work carried out under the previous government. The 2012 Joint Study on Aviation Capacity found that Kingsford Smith Airport does not have enough capacity to meet rapidly growing demand for air travel to and from Sydney. By 2027 there will be no more slots available at Kingsford Smith; by the mid-2030s there will be no additional capacity.11

A review of the potential sites for a second Sydney airport, which examined 80 sites across 18 locations around the Sydney region, found that the site at Badgerys Creek—where nearly 1800 hectares of land was purchased by the Hawke Government decades ago—remained the preferred location.12

Late last year, we completed the multi-phase process to prepare and finalise a formal environmental impact statement. In December I joined with the Prime Minister to announce the Airport Plan's formal determination. This means that for the first time there is now regulatory approval, under the Airports Act 1996, to build and operate a Western Sydney Airport.

There has also been an enormous amount of work going on behind the scenes to consult with Sydney Airport Group.

Sydney Airport Group holds a Right of First Refusal to build and operate Western Sydney Airport, granted to it when Kingsford Smith Airport was privatised in 2002.

Under the terms of the Right of First Refusal the Commonwealth Government was required to consult with Sydney Airport Group before issuing a “Notice of Intention.”

The consultation process lasted for over two years and involved more than one hundred meetings.

In December, we issued a Notice of Intention to Sydney Airport Group—around 1,000 pages of detailed legal documentation setting out the formal contractual terms for Sydney Airport Group to develop and operate Western Sydney Airport at Badgerys Creek.

If Sydney Airport Group accepts the Notice of Intention these will be the terms of the contract between the Commonwealth and Sydney Airport Group governing the construction and operation of Western Sydney Airport.

Under the contract, Sydney Airport Group would be required to build the airport to the approved standard —including a 3,700 metre runway and a terminal with capacity for 10 million passengers a year. It sets out key milestones—with earth moving works to commence by late 2018 and airport operations to commence by 2026.

All of the costs of building and operating the airport would be met by Sydney Airport Group in return for all of the commercial benefits of ownership of the airport over 99 years.

Should Sydney Airport Group 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 Group.

The Government has given Sydney Airport Group until 8 May to respond to the Notice of Intention. This is the time frame set down in the Right of First Refusal documentation, in circumstances where Sydney Airport Group is ‘substantially familiar’ with the terms of the Notice of Intention when it receives it.

At Sydney Airport Group's recent announcement of its full year results, Chief Executive Kerrie Mather indicated that the company was consulting with construction companies, and would endeavour to respond to the Government by the 8 May deadline.13

This is obviously a critical step on the path towards delivery of Western Sydney Airport—determining which party will build and operate the airport.

I should make it clear that regardless of whether Sydney Airport Group, the Government or another party develops the airport, it will be developed as described in the Airport Plan.

And regardless of which party it is, the development process will involve going to market to select a private sector company or companies to design and construct the airport.

Of course, there is already significant work underway. The remaining structures on the airport site are being demolished and cleared; this should be complete in coming months. We are working to meet key requirements of the Environmental Impact Statement such as carrying out groundwater monitoring. There is also work underway on road connections to and around the site.

Over the next two years, key priorities include undergrounding the high voltage transmission line and relocating part of the Northern Road, which both run across the site.

Critical Success Factors

In the remaining time available to me, I want to talk about some of the success factors that will be critical if we are to make the most of the opportunity that Western Sydney Airport presents.

Successful business plan for the airport

The first issue I want to highlight is the importance of having a successful business plan for Western Sydney Airport.

The economic benefits I have spoken about will only come if the airport is successful as a business: attractive to passengers and hence to airlines, and attracting significant and growing numbers of flights each week.

The plans for the first phase of Western Sydney Airport's operations see it starting with around 3 to 5 million passengers a year from 2026, and reaching around 10 million passengers a year by the early 2030s.

As a comparison, today Adelaide Airport serves around 7 million passengers a year, Gold Coast 5 million and Canberra 3 million.14

We have benchmarked the first stage of the airport against Adelaide and Canberra airports. For example, the modern and efficiently designed terminals at these two airports are important indicators of what the Government expects would be appropriate for Western Sydney Airport.

The Stage 1 terminal will be about the size of the T3 domestic terminal at Kingsford Smith Airport—although it will be capable of handling international as well as domestic services.

In the early stages of its growth, low cost or leisure airlines—offering both domestic and international flights—are expected to be an important part of the mix.

Low cost carriers represented 18.4 per cent of international passenger traffic in Australia in August 2016—up from 15.8 per cent the previous year.

In the domestic market, low cost carriers have taken significant market share on both key leisure and main-haul routes. Domestic low cost carrier market share rose from around eight per cent in 2005 to 31 per cent in 2013.15

Last year I had the chance to visit Heathrow, Gatwick and Luton Airports, all of which serve London. I was interested to better understand how different airports operate in a multi-airport city.

I was struck on my visit to Luton Airport north of London by the level of activity at that airport, which largely serves low cost carriers such as Easyjet and Wizz. Luton had nearly 15 million passengers last year and is growing strongly.

At both Gatwick and Luton, the Chief Executive emphasised the benefit of the catchment area—people who are closer to their airport than other airports in the London area. As I mentioned earlier, some two million people will be closer to Western Sydney Airport than Kingsford Smith.

I have seen some commentary which criticises the idea of Western Sydney Airport as a ‘low cost’ or ‘discount’ airport. That is a misunderstanding. The airport is being planned to operate for fifty, seventy, even one hundred years. From the late twenty thirties, with capacity exhausted at Kingsford Smith, Western Sydney Airport will experience significant traffic growth. Certainly it is being planned to serve every segment of the market.

But in its early years it is important to have a clear understanding of the market segments where Western Sydney Airport will have an advantage from the outset—and one such segment is low cost carriers.

Indeed Qantas CEO Alan Joyce has indicated that Western Sydney Airport could potentially be a base for Jetstar, the Qantas Group's large and successful low cost carrier. Joyce commented that in London British Airways operates out of Heathrow and Ryanair out of Stansted, and a similar model could work for Jetstar at Western Sydney Airport.16

Of course one of the other advantages Western Sydney Airport will have is in offering slots to international operators who are unable to obtain slots at Kingsford Smith Airport. Sydney is Australia's international gateway, with 40 per cent of Australia's international traffic—but there are international operators unable to come to Sydney today.

It is instructive to look at comments reported in the media late last year from the local management teams of Chinese airlines. For example, Kathy Zhang of China Eastern said that because Kingsford Smith was so close to its capacity, it was hard to start new flights into Sydney, and added:

The second airport facility and infrastructure is very important if we are opening the skies.17

I think it is clear that Western Sydney Airport has bright prospects. To maximise those prospects, it will be important to have a sound strategy to focus on the segments where it can do well from the outset.

Close co-operation between NSW and C'lth Governments

Another key success factor is close co-operation between all relevant levels of government. The Australian Government has responsibility for aviation and hence for delivery of the airport. But the NSW Government—along with the local councils—has responsibility for land use planning around the airport, and many other issues important to the airport's success.

Since the 2014 announcement committing to proceed with Western Sydney Airport there has been excellent co-operation between the two governments. For example, the two governments are jointly funding the $3.6 billion Western Sydney Infrastructure Plan, to deliver first rate ground transport connections such as the new M12 which will connect the airport to the M7 and in turn the Sydney motorway network.

The close relationship is very much continuing under Premier Berejiklian, and the appointment of Stuart Ayres as Minister for Western Sydney will only strengthen the relationship. I was pleased to join Minister Ayres on a recent visit to the airport site.

The two governments have committed to working together on the Western Sydney City Deal, a coordinated plan for growth that complements these infrastructure investment projects in Western Sydney and maximises the benefits from the development around the airport precinct.

We are also working together on a joint scoping study into the rail needs of Western Sydney and Western Sydney Airport—asking what the right route would be for a rail connection to the airport, how much will it cost, when should it be built and how should it be funded. We are ensuring the airport is rail ready by protecting a rail corridor within the airport site.

Community support and engagement

Another critical success factor is building and retaining community support for the airport—and ensuring that there is continuing community consultation regarding this important facility.

I was struck, visiting airports last year such as Schiphol and Gatwick, by the importance the management teams at those airports attach to engaging closely with their local community.

We are seeking to take the same approach. For example, the Government has announced our intention to establish the ‘Forum on Western Sydney Airport’ (FOWSA.) This will be an important and continuing community consultation mechanism.

We expect to announce the membership of FOWSA in coming months.

A major focus for consultation over the next few years will be the process of developing the flight paths.

FOWSA will be important for this, along with many other methods of community engagement.

Around 80 per cent Western Sydney community have a supportive or neutral attitude towards Western Sydney Airport, according to our regular surveys.18 But this is something we need to work at continually—so there is going to be lot of emphasis on keeping the community informed throughout the life of this very significant project.

Attracting the economic activity we want

Let me turn finally to another critical success factor if Western Sydney Airport is to drive economic activity as we intend—what happens outside the airport to attract the economic activity we want.

By optimising land uses around the site we can drive compatible development and help attract businesses that get value from being located close to an airport.

This land use planning and the development of Western Sydney is a major focus for the NSW Government's Greater Sydney Commission, along with the Department of Planning and Environment and their work on the Western Sydney Priority Growth Area.

There is a clear pattern as to the kinds of businesses that airports attract.

Last year I visited Incheon Airport in Korea, a massive airport which opened in 2001. Industries located nearby include logistics, financial services, international business centres, and manufacturing facilities such as pharmaceuticals. In the new town of Song-do, just across the bay, there are a number of international and local universities.

At Schiphol Airport in the Netherlands, there is extensive surrounding development including business parks, corporate headquarters and number of high-tech industrial parks.

Now Western Sydney Airport will start on a smaller scale than these two airports, the largest in their respective nations. But nevertheless the principle is clear: land use planning around the airport can help to attract the kind of businesses that gain value from the connectivity the airport offers.

These might be in advanced manufacturing—in pharmaceuticals or high-tech products; or conference and convention facilities; or logistics facilities handling perishable goods such as flowers and fresh meat and vegetables.

Already we are seeing strong indicators of business interest in locating in the region around Western Sydney Airport.

Plans have been announced for a new 275-room luxury hotel in Luddenham, at the existing Twin Creeks Golf Club.19 The new ‘Sydney Science Park’ at Luddenham has recently received planning approval from the NSW Government.

I have also met with a number of other businesses and organisations interested in developing facilities in the airport region.

Conclusion

Let me conclude, then, with the observation that Western Sydney Airport will bring significant benefits for the people of Western Sydney, of Sydney and of the nation.

The first priority is to make it a successful airport carrying significant and growing traffic.

But its true potential is even greater—as the hub of a vibrant new urban area in Western Sydney, with jobs and economic activity.

The Commonwealth and NSW Governments, along with many other stakeholders, are hard at work to realise this vision.

  1. Kasarda, John D. 2015. A Western Sydney Aerotropolis: Maximising the benefits of Badgerys Creek
  2. NSW Bureau of Transport Statistics (2014) http://www.bts.nsw.gov.au/Statistics/Population-Forecasts/
  3. Estimated Resident Population of Western Sydney (2015): 2,166,487. id Demographic Resources. http://profile.id.com.au/cws
    Estimated Resident Population of Gold Coast City (2015): 555,608. id Demographic Resources.
    http://profile.id.com.au/gold-coast/
  4. 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
  5. Deloitte. 2015. Shaping Future Cities: Designing Western Sydney.
  6. 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.
  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. ibid
  9. The most densely populated suburbs in Australia are Pyrmont, Potts Point, Darlinghurst and Surry Hills. Australian Bureau of Statistics. Inner Sydney, Australia's most densely populated. http://www.abs.gov.au/ausstats/abs@.nsf/lookup/3218.0Media%20Release12011-12
  10. International Civil Aviation Organization. 2014. Aircraft-Noise Technology Review and Medium- and Long-Term Noise Reduction Goals.  http://www.icao.int/publications/Documents/10017_cons_en.pdf
  11. Commonwealth of Australia. 2012. Joint Study on aviation capacity in the Sydney region
  12. ibid
  13. Australian Aviation. 16 February 2017. “Sydney Airport to decide on Badgerys Creek by May”
    http://australianaviation.com.au/2017/02/sydney-airport-to-decide-on-badgerys-creek-by-may/
  14. Bureau of Infrastructure, Transport and Regional Economics. 2016. Domestic aviation activity 2015–16.
  15. Western Sydney Airport Environmental Impact Statement, Volume 1. 2016
  16. Robyn Ironside, The Daily Telegraph, 30 January 2017 http://www.dailytelegraph.com.au/news/national/jetstar-set-to-call-badgerys-creek-home-under-alan-joyces-vision-for-qantas-operations/news-story/3630cd4a9bcb5c230a123d901c7d9355
  17. Scott Murdoch, The Australian, December 21 2016, http://www.theaustralian.com.au/business/aviation/ chinese-airlines-stress-need-for-second-airport-in-sydney/news-story/6b8f619723b8ea0015dc3395bf515aa4
  18. Western Sydney Airport: Evaluative community research—December 2016 Research overview. http://westernsydneyairport.gov.au/files/Dec_2016-research-summary.pdf
  19. Penrith Press, 5-star resort hotel with Wet'n'Wild-style beach proposed for Sydney's west. Published 9 February 2017. http://www.dailytelegraph.com.au/newslocal/penrith-press/resort-hotel-for-sydneys-west/news-story/de18c6d68e609103f7ea994c136dc6e3