Maximising Western Sydney Airport Opportunities

Speech

PFS007/2017

06 June 2017

Tourism Forum, Sydney

Over the Christmas break my wife, my son and I spent a day with the Blue Mountains Adventure Company. We started at their facilities in Katoomba, and they took us canyoning at sites in the Wollemi National Park.

We had a wonderful day—and it was a powerful reminder to me of the unique, high quality tourism offerings in Western Sydney and the Blue Mountains.

Of course Katoomba is only an hour's drive from the site of Western Sydney Airport—so this experience also underlined to me how much the new airport could boost tourism in Western Sydney, the Blue Moutains, the Southern Highlands and the other areas which will now be conveniently located to a major airport.

So I am really pleased to be here today at this very important event discussing the tourism opportunities that the arrival of Western Sydney Airport will present—and what we need to do to capture those opportunities.

It is very pleasing to see the extent of representation here today. We have three levels of Government, tourism operators and businesses, and a broad section of the Western Sydney and Blue Mountains tourism communities.

In my remarks today I want to start by reviewing our progress to date on Western Sydney Airport. Next I want to discuss the capacity of the airport to drive tourism, both domestic and international. Finally, I will discuss the importance of a co-ordinated approach.

Progress to date

Let me start then by reviewing progress on Western Sydney Airport.

For decades this project has been under discussion—but in 2014 the Coalition Government took the decision to proceed.

Since then an enormous amount of work has been done, including vital regulatory and contractual processes. The Commonwealth Government has prepared and issued draft and final Environmental Impact Statements.

We have prepared and approved the Airport Plan—which gives formal approval under the Airports Act to build an airport at Badgerys Creek.

There has been a large amount of work in consulting with Sydney Airport Group under their right of first refusal, before issuing a formal contractual offer to them, known as the Notice of Intention.

Recently, that process culminated with the announcement that Sydney Airport Group would decline the Right of First Refusal, and that the Government would establish a new government owned company, WSA Co, to build and own the airport, with the airport to be operational by 2026 with a terminal with capacity for ten million passengers.

WSA Co will be established early in the 2017-18 financial year, with an experienced board and management team, who will bring in private sector expertise.

The Government has committed up to $5.3 billion in the 2017-18 Budget in equity funding to go to WSA Co.

Western Sydney Airport is critical, not just for the Sydney basin, but also nationally. Sydney is Australia's busiest aviation market, with 42 per cent of all tourists to Australia coming into Sydney.[1]

The 2012 Joint Study on aviation capacity in the Sydney region found that Sydney Kingsford Smith Airport will soon face serious constraints. By around 2027 all slots will be allocated.

By around 2035 there will be practically no scope for further growth of regular passenger services at Sydney Kingsford Smith.

Western Sydney Airport will have a terminal with capacity for 10 million passengers a year on opening—and long term growth plans so Sydney's aviation capacity needs can be met for many years to come.

How the Airport can drive tourism

Let me turn then to what Western Sydney Aiport can do to drive tourism: both the total volume of Australian and NSW tourism market, but then more specifically in Western Sydney, the Blue Mountains, the Southern Highlands and other surrounding areas.

To start with, Western Sydney Airport will provide vitally needed aviation capacity—better enabling our tourism sector to capture the opportunities from rapidly growing markets particularly from Asia.

The 2014 Deloitte report on the economic impact of the Western Sydney Airport noted that the inbound tourism to Australia from China is expected to increase at 7.2 per cent a year over the period to 2020, and Indian visitor arrivals will grow at 8.5 per cent.[2]

Western Sydney Airport will be well placed to serve international operators who are unable to obtain slots today at Kingsford Smith Airport.

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.[3]

A second way in which Western Sydney Airport will help drive inbound visitor volumes, I believe, is that it is likely to be of particular interest to international low cost carriers wanting to bring flights into Sydney. There is nothing like lower prices to stimulate a market—but today with the capacity constraints into Sydney there are more limited opportunities for low cost carriers to add capacity than will be the case once Western Sydney Airport opens.

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.

Last year I had the chance to visit Heathrow, Gatwick and Luton Airports, all of which serve London. 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 in 2015 and is growing strongly.

Now I want to be clear here that we are certainly not planning Western Sydney Airport to be a ‘low cost’ or ‘discount’ airport. 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 across all segments including business travellers.

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.[4]

Now this significant new flow of visitors will be coming to an airport which is an hour from key Blue Mountains destinations and much closer to Western and South Western Sydney than is the point at which visitors by air arrive today. So this is a brand new, and increasingly large, market for tourism operators in these regions to target.

Let me also make the obvious point that as well as inbound international traffic there will be plenty of inbound domestic traffic. Again, the domestic market is important and growing. The number of Australians taking overnight trips has increased by 6 per cent to 37.1 million trips, contributing $30.7 billion a year to the economy.[5]

Domestically, the ‘visiting friends and relatives’ segment is an important sector of the air travel market. As Western Sydney, which is already Australia's fourth-largest city, continues to grow, this will be a strong factor drawing visitors into the region.

The global evidence suggests that the connectivity provided by an airport is very important in driving visitor activity in the region surrounding that airport.

Dallas Fort Worth Airport in Texas, for example, opened as the region's second airport in 1974 and now has 65 million passengers a year. A recent economic study found that the impact of visitor spending in the surrounding region of North Central Texas, attributable to the airport, was over $2.8 billion a year, and supported over 22,000 jobs.[6]

Another example is Cork Airport in Ireland. A survey of passengers there found that 40 per cent of passengers would not have visited the area in the absence of air service connections. It is estimated that expenditure by these visitors sustained 3,889 jobs.[7]

Let me mention two specific mechanisms which will be important to generate extra tourism activity in Western Sydney and surrounding areas.

The first is the way that Western Sydney Airport is stimulating the building of additional hotel and accommodation capacity. For example, plans were recently announced for a new luxury hotel here at the Twin Creeks Golf Club. [8] Earlier this week it was reported that Accor hotels will open a new MGallery by Sofitel hotel at the Inglis Riverside Stables in Warwick Farm, with an equine theme. Accor Hotels Chief Operating Officer Simon McGrath was quoted as saying that…

the area will become a lifestyle precinct to service Liverpool's growth, especially with the new airport, Badgery's Creek, confirmed.[9]

A second mechanism will be the potential for standard itineraries offered by inbound packaged tour operators to vary. It is easy to imagine tourists who fly into or out of Western Sydney Airport on an itinerary which includes a day or two visiting local attractions in Western Sydney, the Blue Mountains or the Southern Highlands, in addition to the more traditional features such as the Opera House, Sydney Harbour and Bondi Beach. With a new airport and new accommodation opening in Western Sydney, such an itinerary might well have significant cost advantages for the operator and the customer over the current standard.

There is no doubt this region has the quality of product available. It is rich with unique natural assets and a diverse range of tourism experiences, including nature, sport and event-based activities. What is very exciting is that we are about to see a transformation in the size of the market opportunity.

A coordinated approach

Let me finally speak briefly about the co-ordinated approach we have been taking so far to maximise the opportunity Western Sydney Airport offers, and how we can build on that approach.

The Turnbull Government federally and the Berejiklian Government in New South Wales have been working together very closely—as is evidenced by the Ministerial attendance at today's forum.

Our agenda includes a $3.6 billion program of land transport works under the Western Sydney Infrastructure Plan, a Joint Scoping Study with the NSW Government on meeting the rail needs of Western Sydney and Western Sydney Airport, and finalising the Western Sydney City Deal.

I am sure my colleague Angus Taylor will speak more about the Western Sydney City Deal and the way we are working with both the state government and the councils of Western Sydney.

Earlier this year I held a round of meetings with local councils to discuss the airport specifically, including Blacktown, Blue Mountains, Camden, Campbelltown, Fairfield, Liverpool, Penrith and Wollondilly.

It is true that one or two councils maintain a formal position of opposition to the airport. But 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.

Let me single out one example: the enthusiasm of Wollondilly Council for stimulating visitor activity in their beautiful area, including the walk, which they are working to promote.

We collectively have a great deal of work ahead of us as we turn Western Sydney Airport from concept into reality.

Our first task is to design and build an airport that the people of Western Sydney can be proud of. But much more than that, we need to identify and seize the economic opportunities that the airport can offer.

In sector after sector the signs are very good. In the defence and aviation sector global company Northrop Grumman recently announced plans to build a $50 million centre of excellence near the airport.[10] And in sectors as diverse as science, education and logistics, there is very strong interest.

The tourism opportunities too are obviously very significant as I have argued in this speech. But we will only maximise them if all levels of government are working together, and working with the private sector.

Concluding remarks

Let me conclude then with the observation that we are playing for a very big prize here.

Western Sydney Airport has the potential to transform tourism in Western Sydney, the Blue Mountains, the Southern Highlands and other surrounding areas—as well as impacting very positively on our national tourism markets.

We need a co-ordinated and strategic effort to turn that potential into reality.

Today's forum is about kicking off that co-ordinated work. Thank you for attending—and I look forward to seeing this sector flourish over coming years.

[1] Tourism Research Australia. 2016. State of the Industry 2015-16.

[2] Economic impact of a Western Sydney Airport—Deloitte Access Economics, 2014, p.11 www2.deloitte.com/content/dam/Deloitte/au/Documents/finance/deloitte-au-fas-economic-impact-western-sydney-airport-240914.pdf

[3] Scott Murdoch, The Australian, December 21 2016, www.theaustralian.com.au/business/aviation/chinese-airlines-stress-need-for-second-airport-in-sydney/news-story/6b8f619723b8ea0015dc3395bf515aa4

[4] Robyn Ironside, The Daily Telegraph,30 January 2017 www.dailytelegraph.com.au/news/national/jetstar-set-to-call-badgerys-creek-home-under-alan-joyces-vision-for-qantas-operations/news-story/3630cd4a9bcb5c230a123d901c7d9355

[5] www.tra.gov.au/ArticleDocuments/208/NVSDec2016.pdf.aspx?Embed=Y

[6] https://www.perrymangroup.com/wp-content/uploads/Perryman-DFW-Airport-Impact-11-30-2015.pdf

[7] ‘The Social and Economic Impact of Airports in Europe,’, York Aviation & Airports Council International, January 2004, p 44

[8] Penrith Press, 5-star resort hotel with Wet'n'Wild-style beach proposed for Sydney's west. Published 9 February 2017. www.dailytelegraph.com.au/newslocal/penrith-press/resort-hotel-for-sydneys-west/news-story/de18c6d68e609103f7ea994c136dc6e3

[9] ‘Inglis to build equine-themed MGallery hotel’, Australian Financial Review, 5 June 2017, p 32

[10] www.pm.gov.au/media/2017-05-15/50-million-new-jobs-future-centre-excellence-western-sydney-airport