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Melbourne trumps Sydney in airport stakes

Avalon airport looks set to become Melbourne’s second international airport, after the Federal government announced it would amend the airport’s lease to allow construction of a new terminal. The new terminal would allow Avalon airport to service international flights.

Avalon airport chief executive Justin Giddings has described it as a win for the region and Victoria, and enabled the airport to avoid red tape, cutting at least two years from the time an agreement was reached with an airline to when flights could begin. He went on to say that the airport was well placed to meet growing demand for air travel, and could become a major economic driver for the state, with its aircraft maintenance, domestic and international flights, and rail, road and sea connections.

The Victorian state government has pledged to build a rail link between Melbourne and Avalon, 55kms south-west of the CBD.

The current lease is held by private transport firm, Linfox. The announcement means the company can begun its search to secure an international carrier, and The Australian reports that Linfox is close to signing up two specific and substantial freight operators. Qantas Airways Limited’s (ASX: QAN) low cost carrier, Jetstar, operates domestic services from Avalon, but both airlines had no immediate plans to operate international flights, according to the newspaper.

With a new terminal to be built, and expectations that it could be more competitive on costs than Tullamarine airport, Virgin Australia Holdings (ASX: VAH) could be enticed to start using Avalon in future.

The announcement is a blow for Sydney and NSW, with a decision on a second airport for Australia’s largest city stuck in gridlock. That’s good news for Sydney Airport (ASX: SYD), the owner of the airport – in that it can maintain its monopoly for now. The problem is that international travellers may decide to fly into Australia via Melbourne, with its two airports, and by-pass Sydney. That could see some overseas airlines cease to use Sydney airport, resulting in falling passenger numbers and revenues.

The NSW state government’s idea that international travellers will fly into Canberra and then get a high-speed train to Sydney appears unrealistic. Given the discussion about Sydney’s second airport has gone on for many years already, and is likely to continue, Melbourne may have gained the advantage.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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