Melbourne trumps Sydney in airport stakes

Avalon to become Victoria's second international airport

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published October 15, 2012 11:37 am AEDT

Avalon airport looks set to become Melbourne's second international airport, after the Federal government announced it would amend the airport's lease to allow construction of a new terminal. The new terminal would allow Avalon airport to service international flights.

Avalon airport chief executive Justin Giddings has described it as a win for the region and Victoria, and enabled the airport to avoid red tape, cutting at least two years from the time an agreement was reached with an airline to when flights could begin. He went on to say that the airport was well placed to meet growing demand for air travel, and could become a major economic driver for the state, with its aircraft maintenance, domestic and international flights, and rail, road and sea connections.

The Victorian state government has pledged to build a rail link between Melbourne and Avalon, 55kms south-west of the CBD.

The current lease is held by private transport firm, Linfox. The announcement means the company can begun its search to secure an international carrier, and The Australian reports that Linfox is close to signing up two specific and substantial freight operators. Qantas Airways Limited's (ASX: QAN) low cost carrier, Jetstar, operates domestic services from Avalon, but both airlines had no immediate plans to operate international flights, according to the newspaper.

With a new terminal to be built, and expectations that it could be more competitive on costs than Tullamarine airport, Virgin Australia Holdings (ASX: VAH) could be enticed to start using Avalon in future.

The announcement is a blow for Sydney and NSW, with a decision on a second airport for Australia's largest city stuck in gridlock. That's good news for Sydney Airport (ASX: SYD), the owner of the airport – in that it can maintain its monopoly for now. The problem is that international travellers may decide to fly into Australia via Melbourne, with its two airports, and by-pass Sydney. That could see some overseas airlines cease to use Sydney airport, resulting in falling passenger numbers and revenues.

The NSW state government's idea that international travellers will fly into Canberra and then get a high-speed train to Sydney appears unrealistic. Given the discussion about Sydney's second airport has gone on for many years already, and is likely to continue, Melbourne may have gained the advantage.

If you only invest in one company this year, make it our "Top Stock for 2012-13". Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in this brand-new FREE report.

More reading

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.