Take a flying jump
Townsville GOOD. Infrastructure Minister Paul Fletcher is to be very profoundly congratulated for staring down the extraordinarily greedy Macquarie- led – or is that repeating myself? – Sydney Airport Corporation and committing the Federal Government to build the second Sydney airport.
It will cost $ 6 billion. That will most decidedly be some of Treasurer Scott Morrison’s “good debt”. In any event it will be spread over the next 10 years or so, and at around $ 600 million a year essentially insignificant in the bigger budget scheme of things.
The airport should be developed as a full- on, full- service competitor to the main airport at Mascot. It most certainly should not be just a “fill- in” for the main airport.
That would allow Sydney Airport to continue to gouge travellers as outrageously as it does now. Having a proper competitor – albeit, only in 10plus years – should force it to trim prices and to improve services.
Perhaps it will be forced to do what it should have been forced to do before its privatisation – or as a condition of the privatisation – back in 2002, and that is integrate the domestic and international terminals.
The sale of the airport was a huge black mark against the Howard- Costello government; a living case study of how not to sell a governmentowned business where the only focus was on maximising the sale price. Giving the buyer a 99- year lease wasn’t the major problem – that’s the equivalent of selling it outright. The disgrace was in giving it a first- refusal on any second Sydney airport; and so the ability to maintain an absolute monopoly of our premier national gateway for a century.
We – and Fletcher and the Government – have spent the past three months waiting to see whether Sydney Airport, led by Kerrie Mather ( pictured) would go for the monopoly. Instead, it’s opted to maintain super- high profit from Mascot.
Sydney Airport is without any argument the most profitable business in the country. How could it not be with the monopoly over our premier gateway?
It consistently makes 80c- plus of gross operating profit ( EBITDA) on every dollar of revenue. This is more profitable even than Transurban, the ( expense- to- motorists) road that swallowed Melbourne and went on to swallow Sydney and Brisbane. its
Transurban “only” makes around 75c of gross profit in the revenue dollar. Although it does pocket an extraordinary 86c of gross profit in the revenue dollar on the longer- established and “gouge- expanded” CityLink.
It “only” makes Sydney Airport level returns around 80c in the revenue dollar on its Sydney roads; and just 71c in Brisbane.
Surely Queenslanders should tip in some more tolls to keep the wolf from Transurban’s door.
Sydney Airport blinked because it is just too profitable. If it took on the second airport – on the sensible terms set by the Government, so it couldn’t be built cheaply as just a dwarf extension of the Mascot monopoly – it’s gouge- level group profitability would have been reduced to the level of just outrageous. But even then only in a decade’s time. Bizarrely, Sydney Airport was ambushed by low interest rates, otherwise the lower profit of the second airport a decade ahead would have been washed away by the high discount factor.
So we end up with a very good outcome for the national interest. Over time it will work to reduce the huge negative of the disastrous privatisation, which gave a private company a government mandated monopoly to gouge not just all travellers through Sydney but the Australian public more broadly.
That said, Sydney shouldn’t need a second airport right now. If Mascot was run for maximum efficiency, was allowed to run for maximum efficiency – in particular, to operate 24 hours a day with 2017’ s much, much quieter aircraft – it would be able to accommodate all growth in demand through 2035 at least.
But clearly now that the Government has committed to Badgerys, under no, under NO circumstances should Sydney Airport be given a ( another) free lunch.