Business Case for the SunShine CoaSt airport Master Plan

Results and discussion
4.1 Overview
The results presented in the following section are based on a central demand scenario. For the
economic benefit estimation, the results are specified for the government-prescribed discount
rate of 7% and take a national view of expected benefits, unless otherwise specified. The
commercial/precinct analysis adopts SCA’s WACC as the discount rate (13.14% pre-tax
nominal / 10.38% pre-tax real). Terminal values for benefits and costs are excluded in the base
results, however have been considered separately as a specific sensitivity scenario (see
section 4.5.1), although terminal values for land are included as an off-set against land
acquisition costs in the commercial analysis.
In general, the results demonstrate that, while the project is not self-funding on a purely
commercial/financial basis, with the inclusion of non-monetary economic benefits/costs for
airport users, nearby residents and the wider Sunshine Coast region, the project provides
significant net economic benefits.
4.2 Commercial analysis
The Master Plan projects collectively represent a capital investment of approximately $435.6m.
These costs include:
• $292.8m for Runway 13/31 and associated RPT projects (including a percentage
allocation of new terminal costs for passenger processing and baggage handling
facilities)
• $87.2m for the (balance of) relocated terminal costs and new car parking facilities
• $55.6m for the development of sites for commercial precincts, including supporting road
infrastructure
This equates to a total present value capital cost (as at 30 June 2010) of approximately
$176m, applying SCA’s WACC as the commercial discount rate. For the runway/RPT projects
alone, the present value cost is approximately $124m.
Operating costs for the new facilities vary with passenger and aircraft movements, therefore
additional costs accrue as a result of the incremental increase in passenger/aircraft traffic. In
general, there is also a real up-lift from current operating costs due to an increase in the cost of
annual and periodic maintenance expenses. For example, due to the increased size and
nature of the new infrastructure there is an up-lift in periodic maintenance costs of
approximately $7.5m per event (every 12 years). The present value of the up-lift in operating
cost over the model period is approximately $8.8m.
The results of the commercial analysis for the runway/RPT projects indicate that to achieve full
cost recovery (NPV neutrality) for these projects, a charge of ≈$18.55/passenger (real,
$FY2010) would need to be levied on all passengers following the introduction of the new
runway.
Continuing to apply the existing passenger charge would result in a net present value deficit of
$109m.
While some up-lift in the current charge (reflective of increased service standards from the new
runway) is possible, based on discussions with SCA and other analysis it is considered that full
cost recovery is commercially untenable given the level of the current charge, charges at
Sunshine Coast Airport
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