"Push to lure more planes to Sydney airport"

Wednesday, June 26, 2002

Push to lure more planes to airport
By ANDREW WHITE and STEVE CREEDY
The Australian


SYDNEY airport's new owners are banking on a surge in air traffic in the
next two decades to justify the world-record price of $5.6 billion they paid
for the international gateway.

The Macquarie Bank-led Southern Cross consortium was confirmed yesterday as
the winner in the race to buy the airport, paying between $600 million and
$1billion more than the nearest rival bid.

But the sale - revealed by The Australian yesterday - sparked protests from
anti-aircraft noise lobby groups and triggered calls for the proceeds to be
spent on new transport infrastructure.

The price tag for the 99-year lease is a record for airport privatisations
around the world, eclipsing the $4.1billion total raised from selling all
other Australian airports since 1997. It includes $192million for the Ansett
terminal, which has been vacant since attempts to revive the airline
collapsed earlier this year.

Kerrie Mather, managing director of 40 per cent shareholder Macquarie
Airports, said her group had bought the airport cheap. "It has far more
sustainable growth than other airports, because it's the gateway airport and
it has more diverse sources of revenue," Ms Mather said. "We are buying when
it is just about to go through a growth spurt on the back of a recovery in
traffic post-September 11."

The new owners would benefit from the deregulation of airport charges from
July 1, she said, but the consortium would not immediately raise charges to
airlines.

The Southern Cross consortium will upgrade the retail area, duty-free shops
and high-rise parking lots at the airport, and look at property development
opportunities for the 188ha site in its quest to squeeze out more money.

Traffic through the airport has fallen in the past year because of September
11 and the collapse of Ansett. But the new owners are counting on a 10.5 per
cent jump in passenger traffic growth through the airport next financial
year to produce a 19 per cent jump in earnings. By the year 2020, it expects
traffic to more than double from 25.3 million passengers to 62.8 million,
despite the restrictions on flights paths and plane frequencies over the
suburban Sydney flight paths.

Ratings agency Standard & Poor's gave the airport a BBB credit rating
yesterday, because of the "aggressive" use of debt, and said there was
little room for error in key performance measures such as passenger growth
rates, operating expenses, retail and parking.

The price aroused concern from airlines, which pay a large part of the
airport's revenue through landing fees and other charges. "The $5.6 billion
seems to the airlines to be way over what the market was predicting the
airport might be worth," said Warren Bennett, executive director of the
Board of Airline Representatives, which lobbies for international airlines.
"And that makes them pretty nervous (about) what the future for aeronautical
charges might be."

Transport Minister John Anderson said the sale would not change the
regulation of the airport, and might even reduce aircraft noise over inner
Sydney. Laws forbid more than 80 aircraft movements an hour at the airport,
impose a curfew on flights between 11pm and 6am and guarantee access for
regional airlines.

The Mayor of Marrickville - a suburb affected by aircraft noise - said every
hour could now become a peak hour at the airport. "The reality is the sale's
going to mean less public control over one of the most significant polluters
in Sydney," Barry Cotter said.

Finance Minister Nick Minchin said the sale reflected the Government's
belief that it should not be involved in business enterprises unless
absolutely necessary.

"There is an inherent and untenable conflict for the Government being both
the owner of a business and the regulator of the business," he said. "Our
role is to act as the independent regulator and to allow private enterprise
to run these businesses commensurate with government regulations."

Senator Minchin said the $5.6 billion would all be used to repay government
debt.

But Labor, unions and the tourism industry said some of the money should be
used for other purposes.

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