Australian government to build second Sydney airport

The operator of Sydney's main airport, Sydney Airport Group, owner of Kingsford Smith, today opted out of plans to build a second major airport for the city citing financial risks, leaving the Australian government to develop the project.

In December the government had announced plans for another airport in Sydney, ending decades of indecision over a facility designed to handle 10 million passengers a year initially.

The airport was scheduled to open in 2026, easing pressure on Sydney's Kingsford Smith Airport, the main gateway into Australia, which was reaching capacity.

The listed Sydney Airport Group had the first right of refusal to build and operate the new multi-billion dollar Western Sydney Airport.

It said, "Despite the opportunities that WSA will present, the risks associated with the development and operation of WSA are considerable and endure for many decades without commensurate returns for our investors," the company said in a statement to the stock market.

Prime minister Malcolm Turnbull said the government would take over the project, with details that would be revealed in the federal budget next week.

The site of the proposed airport was 40 km from central Sydney as against 8 km for the existing airport, With no rail link from the proposed site to the city, the viability of the facility was in doubt.

Airlines had warned they would be able to switch on if the fees at the new facility were low.

"It's a burden that the government has the capacity to bear - the burden being not simply the costs, but the risks," independent economist Saul Eslake told Reuters.

"Nobody really knows what the demand for services at this facility is likely to be."

According to Turnbull, the project would inject more than A$1.9 billion into the economy during the construction phase alone.

Sydney Airport had earlier called the project "deeply uneconomic".

"The risks associated with the development and operation of the airport are considerable, and that will continue for many decades without commensurate returns for our investors," Sydney Airport chief executive Kerrie Mather said at the Macquarie Australia Conference, an economic forum.