Backing secured for major airport serving Melbourne’s south-east

“The airport would initially be the size of Canberra’s but could grow to be bigger than Tullamarine.  Photo: Canberra Airport”

A $7 billion proposal to build a privately-owned international airport for Melbourne’s south-east will be presented to the Victorian government next week.

Melbourne-headquarted Paragon Premier Investment Fund wants to build a commercial airport between Koo Wee Rup and Lang Lang, to service Melbourne’s booming south-eastern suburbs and the state’s east.

Building Melbourne’s third major airport is already part of the state government’s long-term planning strategy and Paragon expressed interest in developing it earlier this year.

But the plan has taken an important step towards becoming a reality, with Paragon’s chairman Alande Mustafa Safi saying he last week received a signed letter of intent from an infrastructure financier pledging to bankroll the estimated $7 billion airport.

“It will be funded privately, so we’re literally going to build and say ‘here it is’,” Mr Safi said. “The funds are ready, the developers are ready.”

Mr Safi would not disclose the identity of its capital partner before presenting the plan to the state government next week, but said it was a consortium based in Europe and the Middle East that had built a number of airports, including two in Europe.

The partner has funded $US58 billion ($75 billion) worth of government-backed projects around the world to date, he said.

The airport will not need any government funding, but the state will need to deem it a necessary piece of infrastructure for the capital partner to back it, Mr Safi said.

Paragon’s business plan for the airport places it on land near Caldermeade, between Koo Wee Rup and Lang Lang, in an area pinpointed by the Victorian government’s Plan Melbourne strategy.

The airport would initially have two runways and be around the size of Canberra Airport, which handles about 2.8 million passengers a year.

Cargo flights could begin by 2020, followed by commercial domestic and international services in the two years beyond that, he said.

An airport in the area would have a catchment of about 1.5 million people, according to a 2013 report prepared by the Cardinia Shire Council – similar to the population of Adelaide, which has a domestic and international airport servicing 7.8 million passengers a year.

It would service a population of around 3 million by 2050, according to the state government’s 2013 Plan Melbourne report.

Mr Safi said there would be provisions to build two more runways and increase passenger numbers beyond Tullamarine’s 35 million a year as demand grew.

Currently it takes Mr Safi up to two hours to drive from his Berwick home to Melbourne Airport during peak hour – longer than a flight to Sydney and Canberra – which made the case for a local airport compelling, he said.

However the initial focus would be on cargo, particularly exporting fresh produce overseas.

“From Gippsland to Tullamarine it’s 3.5 hours, but to the Koo Wee Rup proposed airport it will be a 45-minute drive and then overnight to the Asian market, where the demand is,” Mr Safi said.

Melbourne Airport’s chief executive Lyell Strambi has backed a Koo Wee Rup airport, telling reporters last week that Tullamarine would eventually reach its growth limit and that Avalon – which has so far failed to attract international carriers – served the same catchment.

“If Avalon was in the south-east of Melbourne that’d be a great solution,” Mr Strambi said.

Mr Safi, whose investment fund has about $951 million under management and has never backed a major infrastructure project, said he was talking to international airport operators about leasing the new airport.

A spokesman for Victorian Planning Minister Richard Wynne said that while Melbourne and Avalon airports had capacity for more flights, it was important Victoria planned for infrastructure that could handle future growth.

Federal Transport minister Darren Chester said Commonwealth agencies would work with “any future private sector proponents of the airport” on issues such as aviation safety, airspace protection and security.

Infrastructure Victoria will advise the state government on feasibility while the Commonwealth is responsible for granting approval to run an airport.