Air capacity for Sydney

Abstract

Sydney has one major airport, and it faces growing air transport demand – the airport is now becoming subject to excess demand, and this will be a major problem in the future. Investment in additional capacity will be required, and several options for a second airport are being considered. Unlike airports in Europe and North America, hub issues are not very important. In the short to medium term, additional demand can be handled using a number of options, such as more use of secondary airports and greater use of existing capacity at Sydney. One issue which will be present is how excess demand will be rationed ? by prices, slots or congestion? Australia’s light-handed regulation may mean that prices may be used. Another issue is whether the stakeholders will have a strong incentive to invest when it is economic to do so if airlines and the airport both gain from a situation of inadequate capacity, they may have little incentive to invest. A recently completed Joint Study by the Federal and State Governments explored the questions of whether and when a new airport should be built. It did this using both Cost Benefit Analysis and Computable General Equilibrium modelling (a technique which has distinct advantages for evaluating investments such as airports) however this study treated the two techniques as quite separate, and did not take advantage of the potential complementarities from combining the two.