Passengers who have been flying in and out of Sydney’s new international airport since it opened a week ago might be forgiven for thinking that it was an inevitability in a fast-growing city.
Little would they have known that Western Sydney International Airport would likely have been smaller and opened much later if not for a consequential decision at the highest levels in 2016.
Former Liberal prime minister Malcolm Turnbull recalls how he was confronted with an unpalatable choice in 2016, two years after the Abbott government approved Badgerys Creek as the airport site.
“I thought it was just shocking – I was just appalled by it,” he said.
He is referring to a proposal to Cabinet as late as February 2016 for Sydney Airport Corporation Limited (SACL) to be granted a $4 billion long-term, low-interest loan to induce it to build a second airport in the city.
According to Turnbull, who had replaced Tony Abbott as prime minister in September 2015, the final subsidy proposed by the federal Department of Infrastructure also included indemnities to compensate the owners of Sydney Airport if the project for a second aviation hub ran over budget.
Under the terms of the Howard government’s sale of Kingsford Smith Airport in 2002, a Macquarie Bank-controlled consortium that had become its new owners had been given a right of first refusal to build any new airport within 100 kilometres of Sydney’s CBD.
After Cabinet rejected in 2016 the department’s recommendation to grant Sydney Airport’s owners a “massive subsidy” to build a second airport, Turnbull said the question was whether “we were in a jam legally”.
“We started working on an alternative plan, which was building it ourselves, but we had to honour the right of first refusal,” he recalled.
In working with Paul Fletcher, who was appointed urban infrastructure minister after the 2016 election, they looked at how they could honour the contractual right of first refusal by making Sydney Airport an offer that involved no subsidy at all, an offer it was certain to reject.
The decision to do that was taken to Cabinet in November 2016, Turnbull said, and at the same time it decided that the Commonwealth would build the airport itself when the offer was eventually rejected.
A month later, the zero-subsidy offer was made to Sydney Airport.
“[It] came as a huge shock to [Sydney Airport], I might add because they had been in all these discussions about asking for larger and larger and larger subsidies,” Turnbull said.
“And suddenly, the Commonwealth turns around and says, “OK, here’s the deal: build the airport, in accordance with these specifications, and there’s no subsidy.”
Sydney Airport quickly flagged it was likely to reject the offer before formally doing so in May 2017 . Within hours, the government announced a Commonwealth-owned company – WSA Co – would be set up to build and operate the new airport.
Turnbull said he doubted the city would have a second airport built if the Commonwealth had pushed ahead with the proposal in early 2016 for a massive subsidy to be provided to Sydney Airport.
“SACL has a vested interest in not having a competitive airport. They would have used the Commonwealth money to build it as slowly as they possibly could. And they would have done everything they could to ensure it did not pose a threat to their own airport,” he said.
“It would have been a terrible outcome to have two airports in the same city belong to the same company.”
With the airport now open to passengers, Turnbull believes it will take time for passenger traffic to grow, but adds that more than 2 million people live closer to the new airport than Kingsford Smith at Mascot .
“The demographics are your friend. As you get more services there, people will use it,” he said.
Fletcher said the new airport would have been smaller and taken years longer to be built if it had been done so by the owners of Kingsford Smith.
“We had been preparing for months for the scenario in which they did not take up the right of first refusal, and when that was announced, we were ready for it, and we made our announcement straight away,” he said.
“From that point, the momentum really started to build.”
He is upbeat about the new airport’s growth prospects, predicting that, by the middle of this century, it will be Sydney’s biggest.
“I’m confident that this airport will spark new competition in domestic aviation. Slots at Kingsford Smith are constrained. But there is ample capacity … at Western Sydney Airport, and let’s not forget half of Sydney’s population is closer to this airport than Kingsford Smith,” he said.
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