![The federal government is prepared to build a new airport at Badgerys Creek if Sydney Airport doesn't.](/content/dam/images/g/t/9/3/3/o/image.related.afrArticleLead.620x350.gttj4q.png/1484736250396.jpg)
Sydney Airport would have to charge terminal fees of more than $50 per person to make an adequate return on a second airport at Badgerys Creek – five times the fees it charges airlines for domestic travellers passing through Kingsford Smith, Standard & Poor's says.
Sydney Airport currently charges airlines $9.44, including GST, for every person who passes through its domestic terminal, and $35.11 for each person who uses its international terminal. The charges are passed onto passengers by the airlines, although Sydney Airport does deals with airlines that can reduce the fees.
S&P; credit analyst Thomas Jacquot, who does not expect Sydney Airport to take up an option to develop the Western Sydney Airport, said "back of the envelope" calculations showed the company would need to charge terminal fees of between $50 and $70 per person at the Badgerys Creek site to compensate for the estimated $5 billion building cost.
"You wind up with a number that is extremely high when you compare that with what they charge passengers going through Kingsford Smith, which is under $10," Mr Jacquot said.
If Badgerys Creek's terminal fees were similar to those currently applied at Kingsford Smith, it would take a long time before returns approached a weighted average cost capital of at least 7 per cent, Mr Jacquot said.
"This is not only because of the relatively low initial passenger volume but also because of the long investment phase during which the investment will generate no return, as cash flows would only start from 2026."
Only 3-4 million passengers are expected to travel through the Western Sydney Airport annually when it opens in 2026 compared with the 40 million passengers who travel each year through Sydney Airport.
S&P; on Tuesday raised its outlook on Sydney Airport's parent's BBB corporate credit rating to "positive" from "stable" amid expectations it will not take on the risk of building the Western Sydney Airport.
Sydney Airport has until mid-May to respond to a 1000-page "notice of intention" from the Commonwealth outlining the exact terms for the Badgerys Creek development. It has been pushing for a nine-month assessment period but a spokeswoman for Urban Infrastructure Minister Paul Fletcher said on Wednesday there had been "no change" to the government's position that under Sydney Airport's Right of First Refusal agreement, it had only four months to respond.
Sydney Airport's largest investor, UniSuper, which has a 16 per cent stake, has also raised questions about the feasibility of a $5 billion investment. UniSuper chief investment officer John Pearce said in late December that the chances of a deal "stacking up" for Sydney Airport without government support appeared "negligible".
Moody's Investors Service, which rates Sydney Airport Baa2 with a stable outlook, has warned that the airport group will face increased competition if a rival company or the government builds the Western Sydney Airport.