Business Case for the SunShine CoaSt airport Master Plan

Approach and methodology
3.1 Overview of approach and modelling
The primary objective of this appraisal is to determine the net economic benefit of the SCA
Master Plan, with a particular focus on the development of Runway 13/31. The assessment
addresses key criteria for public funding for projects and is consistent with Commonwealth and
Queensland guidelines for conducting cost benefit assessments as well as industry best
practice.
The appraisal can broadly be separated into four main areas:
• Commercial analysis – analysis of the runway projects on a stand-alone basis,
including the calculation of charges required to achieve full capital cost recovery and the
calculation of revenue based on ‘benchmark’ commercial charges
• Precinct analysis – analysis of other non-aeronautical precincts outlined in the Master
Plan, including calculation of expected surpluses generated by those precincts that may
be available to cross-subsidise the runway projects
• Economic analysis – analysis of the wider economic benefits (and costs) of the Master
Plan projects and related initiatives, and
• Economic appraisal – integration of the commercial, precinct and economic analyses to
form an initial view on the feasibility of the project and next steps to realise any net
benefits.
The modelling performed in relation to each of the three phases of work was undertaken in a
consolidated commercial/economic model. This model was provided to SCA as agreed under
the terms of our engagement.
The model includes provision for each of the runway projects, precincts, and key areas of
economic impact for the Runway and the wider Master Plan. It was structured to provide an
economic and (limited) commercial analysis of the Master Plan. It was not developed to
provide an overall view of the airport operations; rather it provides an incremental analysis of
the economic value of the additional capability of the airport based on the current configuration
of the Master Plan, using the information available at the time of analysis. The model structure
and features described below should be interpreted accordingly.
The overall model outputs are threefold:
• Outputs of commercial analysis - including NPV of project with market-based charges,
and calculation of the level charges required to deliver a commercial return on capital
invested
• Outputs of precinct analysis – including NPV of precinct projects, and
• Outputs of economic analysis – BCR, NPV and economic IRR analysis.
The model develops time-based (annual) cost and benefits streams and discounts these using
a 7% real discount rate prescribed by State and Commonwealth guidelines (the
commercial/precinct outputs of the model alternatively use SCA’s weighted average cost of
capital, although the prescribed 7% discount rate is applied to the cost streams for the
purposes of inclusion in the economic analysis). The model period was selected to provide a
thirty-year operating period for the runway, although a range of timing and operating scenarios
were considered, some of which have a shorter modelling life (i.e. for runway commissioning
dates later than 1 July 2020).
Sunshine Coast Airport
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