The Turnbull government has committed to constructing Sydney's new $5 billion-plus airport at Badgerys Creek and left the door open to the private sector running it once the first flights begin in less than a decade.
Confirmation of the government's intentions come after Sydney Airport turned down its "right of first refusal" to build and operate Western Sydney Airport because of the "considerable risks" it would bear for decades.
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The Federal government will announce in the budget how much it'll allocate to building the airport in Badgerys Creek after Sydney Airport Group chose not to build and operate it.
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ASX-listed Sydney Airport declines the offer to build the second airport at Badgerys Creek because of the 'considerable risks' to its investors.
Sydney airport announcement
The Federal government will announce in the budget how much it'll allocate to building the airport in Badgerys Creek after Sydney Airport Group chose not to build and operate it.
While the terms were unpalatable for Sydney Airport, Urban Infrastructure Minister Paul Fletcher said it made sense for the government to build and own the new airport because it would boost Sydney's flight capacity and create thousands of new jobs in the west.
"[The] announcement by Sydney Airport was not unexpected at all," he said. "We have been doing detailed contingency planning over many months."
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The government considered clearing the way for other private sector parties to both build and operate the airport but instead decided to construct the curfew-free airport itself.
"Governments can take a longer-term perspective than private sector investors," Mr Fletcher said.
Details about how the construction of the new airport will be financed will be revealed in the federal budget next Tuesday. The government is expected to set up a corporation similar to that charged with overseeing the National Broadband Network.
Mr Fletcher said the question of who would eventually operate the airport would be considered at a later stage, pointing out there was the option under legislation for owners of airports to appoint managers.
Labor supported the plans for the government to build the new airport, describing it as an "economic catalyst for western Sydney".
"There are enormous opportunities around this airport," Labor transport spokesman Anthony Albanese said.
"There's no doubt that private finance will be very interested and will be falling over each other to gain the lease of this airport when that's done."
The government plans for bulldozers to begin moving about 22 million cubic metres of earth at the 1700-hectare site at Badgerys Creek, about 50 kilometres from the CBD, by the end of next year.
By 2026, a 3.7-kilometre runway and terminal capable of handling 10 million passengers a year is due to have opened.
Australia's two largest airlines, Qantas and Virgin Australia, said the government's decision brought certainty and clarity to a major infrastructure project.
Qantas said it supported the new airport because of the "economic opportunities it will bring as well as its potential to introduce some healthy competition for airport services and charges in the Sydney basin".
In delivering the worst kept secret in local aviation on Tuesday, Sydney Airport chief executive Kerrie Mather said it was in its own investors' best interests not to take up the right to build Western Sydney Airport.
"The risks associated with the development and operation of WSA are considerable and endure for many decades without commensurate returns for our investors," she said.
Macquarie equities analysts estimated it was likely the cost of building would amount to about $5.4 billion. However, that did not include the cost of funding the airport's operation in the early years, when it would be unprofitable.
Once the airport opened, the analysts expected it to take about a decade to break even.
While business and community groups welcomed the government's decision, some emphasised the need for a separate delivery authority to oversee the construction.
Unlike Sydney Airport's Kingsford Smith, the new airport will not have a curfew on night-time flying. That will give it a better chance of competing against its much larger neighbour at Mascot.
A group representing international airlines said Western Sydney Airport was most likely to appeal to carriers serving short-haul leisure destinations in its early years.
"It could be a combination of [low-cost] carriers and existing full-service airlines, and certainly there would be an opportunity for freight," Board of Airlines Representatives executive director Barry Abrams said.
Virgin said both it and budget offshoot Tiger were likely to operate some flights at the airport.