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Clearing the air - Julieanne Alroe shares the facts about funding the airport's new runway

8 March 2013

 

A new major runway for Brisbane Airport has been in our long-term plans for more than two decades. It's a big project that will cost around $1.3 billion and will take more than eight years to build. We have $50 million worth of site works underway right now – proof of our commitment to this important project.

 

Over the last five years BAC has been in deep discussions with the airlines that use the airport about when the runway is needed and how it will be paid for.

 

Recently these commercial negotiations attracted media comment and speculation.

 

Some suggested that governments should pay for the runway, or that Australia's major airports should never have been privatised. But since the capital city airports were sold, their owners, including BAC, have invested more than $9 billion dollars in new facilities for travellers and airlines - that's money that taxpayers have not had to spend. So the travelling public has better airport facilities whilst their taxes have been able to be directed elsewhere.

  

Others believe BAC should pay upfront for the runway without seeking a revenue source from those who use and will also benefit financially from its facilities.

 

This unfortunately is unfeasible due to the significant cost of the new runway, a substantial investment banks would be hesitant to lend on in the absence of revenue certainty.

 

BAC wants to build this runway and we want to fund it the same way that all major aviation infrastructure at Australia’s airports has been funded for over a decade.

 

That means a combination of a major investment from the airport and a smaller proportion of contribution by the airlines during construction. This is the normal model for funding major airport infrastructure and in many other industries. And the idea of charging customers now to fund not only current expenditure but future development is not that unusual in businesses big or small. Airlines, for example, do just that when charging their own passengers. You pay for your ticket in advance, sometimes weeks or months, and the airline gets the financial benefit of having your money long before it incurs the cost of flying you anywhere. Your ticket costs also help pay for the airline’s own future plans, including new aircraft and maintenance facilities, terminal improvements and marketing.

 

BAC will invest 75 per cent of the cost of the new runway at BNE through contributions from our shareholders and loans. Only 25 per cent is to come through landing fees. This year, the airlines’ contribution is only an extra 35 cents per domestic passenger on their landing fees. It will increase gradually over the next five years to, at the most by 2017, an extra $3.15 per international passenger.

 

If private investment in Australia’s airports is to continue, this funding model must be allowed to keep working. Australia’s airports, including Brisbane Airport, are mostly owned by Australian Superannuation Funds and the members of those funds expect them to make investments which are financially sound.

  

BAC is a profitable company. And those profits mean we can make the big investment commitments Queensland deserves. And it means our company is a strong and safe investment for tens of thousands of Australians in super funds. We are a Queensland company, we know this runway is important to our state and we are working hard to make it happen.

Brisbane Airport background