Long term public private partnerships have enabled our airports to embrace opportunities in a growing and vibrant aviation sector, despite times of financial difficulty, Federal Department of Infrastructure and Transport, Deputy Secretary, Andrew Wilson told a CEDA forum in Melbourne.

"Unlike other first world countries, Australia is fortunate that our major airports are well managed under a long term lease by the private sector," he said.

Under the current regime, Australia's major airports are cost efficient and highly productive by international standards, he said.

Since privatisation, he said the rate of investment in our major airports has been rising, exceeding $600 million per year in aeronautical infrastructure since 2007.

Mr Wilson said Australia has weathered the many challenges affecting the aviation sector including:

• The Global Financial Crisis;
• Failure of airlines;
• Volcanic dust clouds; and
• Global security concerns.

Despite this, he told attendees the industry faces three key challenges:

• Meeting and funding capacity;
• Balancing urban and aviation development; and
• Managing ongoing development of regulation.

To meet and fund capacity, Mr Wilson emphasised that passenger demand in the Sydney region is set to double by 2035 to 87 million, and by 2015, Sydney Airport will be severely constrained at peak hour.

"There are no easy solutions for adding capacity, but it is a challenge that governments and investors need to be prepared to take on," he said.

In regard to urban and aviation development, Mr Wilson said the aviation sector is reflective of growth in the economy and the population, and with this growth comes the inevitable battle between social amenity and economic development.

"The ongoing need for urban development in areas near our airports has the potential to reduce competitiveness and efficiency of the aviation sector," he said.

Mr Wilson said initiatives have been established to assist in increasing community involvement in the ongoing development of airports to provide better linkages with local councils such as:

• Planning coordination forums;
• Community aviation consultative groups;
• Additional elements in Melbourne Airport's master planning and major development processes.

On regulation he said: "It is important for industry to work proactively with the community and government to ensure an appropriate balance is struck in regulation."

He said while the terrorist threat remains, the aviation industry will need to continue to operate within strict security regulations.

"Empowering industry to develop new or better ways to achieve the desired security outcome has the potential to improve the passenger experience and help maintain our airports competitiveness," he said.

With an estimated contribution of $17.3 billion to GDP and creating around 115,000 jobs, competitive and productive airports are vital for Australia's continued economic prosperity, he said.

Melbourne Airport, CEO, Chris Woodruff said Melbourne Airport is leading international growth ahead of other major Australian airports.

Mr Woodruff said international passengers grew by eight per cent with growth driven by Asia, prominently China, and other Asian markets including Taiwan, the Philippines and Japan.

Traditional markets such as New Zealand and the US also grew, Mr Woodruff said.

"We are Australia's second busiest airport in terms of freight, accounting for 31 per cent of Australia's total air freight," he said.

Mr Woodruff said by 2030, we expect around 60 million passengers to pass through Melbourne Airport every year.

"Our capital expenditure increased by 39 per cent last year to $200 million," he said.

Mr Woodruff said Melbourne Airport was reinvesting this back into the airport through new or upgrading existing infrastructure including:

• Resurfacing both of Melbourne Airport's runways;
• The redevelopment of the international departments retail area;
• The opening of the Australian Pacific Airport Corporation (APAC) Drive on-ramp - a new city bound exit to the Tullamarine Freeway;
• A new domestic terminal - phase one to open in 2014;
• New aircraft parking bays and taxi ways; and
• Upgrades to the airport roads network.

Mr Woodruff said the airport is also taking a detailed look at public transport links and future needs, including a rapid bus option and improving bus access for current services as well as reviewing the Melbourne Airport Rail Link Study.