Sydney’s second airport is coming

Even if the federal government chooses a site before Christmas for Sydney’s second airport, travellers may have to wait up to 21 years before airlines can start using it. That’s 2034 for those mathematically-challenged.

The Liberal coalition is expected to name Badgerys Creek as the preferred location within the coming months, and possibly bringing a second airport for Sydney one step closer after 40 years of indecision.

Domestic airlines, Virgin Australia (ASX: VAH) and Qantas Airways (ASX: QAN) have both publicly stated that they would use a second airport, most likely as a low-cost option for flights to holiday destinations such as the Gold Coast, Cairns and the Sunshine Coast. Budget international airlines like AirAsia X and Scoot could also use the second airport, much as they with Coolangatta on the Gold Coast.

According to a joint study by the NSW and federal governments, the cost is estimated to be around $1.7 billion, excluding the necessary road and rail infrastructure, to build a single runway airport at Badgerys Creek. Adding in the infrastructure takes the cost to around $2.4 billion. A viable competitor to Sydney Airport (ASX: SYD) with dual runways and its necessary infrastructure is estimated to cost up to $8 billion, and is seen as the least likely option.

But the study estimates it would take between 11 and 17 years to construct a single runway airport and up to 21 years for one with parallel runways. In the meantime, Sydney Airport’s owner, the aptly named Sydney Airport, estimates that it can adequately cater to projected demand for the next 30-35 years. However, it’s in the company’s interest to do so. As they say, “never ask a barber if you need a haircut”.

While Sydney Airport holds the right of first refusal to build and operate a second airport in Sydney (within 100kms of the CBD), it’s within the company’s interest to play down the need for a second airport, charging premium rates to airlines and travellers to use Sydney’s only major airport.

Foolish takeaway

The idea for a second airport for Sydney has been kicked around for decades. Despite Sydney Airport believing it can cope with future demand, a second airport which is likely to have no curfew restrictions could bring in many more visitors and tourists from overseas, and appears to be badly needed. That should be good news for the airlines at least.

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Motley Fool writer/analyst Mike King owns shares in Sydney Airport. You can follow Mike on Twitter @TMFKinga

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