The Federal Government's announcement of a second airport for Sydney at Badgerys Creek has been met with enthusiasm by airlines and business groups, but the owner of the city's existing airport has given a lukewarm response.

Sydney Airport has a right of first refusal on the project - a condition of Kingsford Smith Airport's sale by the Federal Government.

The right of refusal gives Sydney Airport the first option to develop and operate any new airport within 100km of Sydney's CBD.

The company says it will engage in discussions with the Federal Government over the project.

"In the interests of the travelling public, airlines and our shareholders, Sydney Airport will apply appropriate commercial and financial discipline throughout any process," the company said in a statement.

Sydney Airport says its latest master plan, which extends to 2033, shows it can meet forecasts for passenger demand in 20 years time.

However, Australia's two major airlines have welcomed the Federal Government's announcement, even if it does turn out that Sydney Airport ends up maintaining its monopoly by exercising its right to run the new facility.

Qantas chief executive Alan Joyce says Badgerys Creek is the best location, and a new airport is needed before the existing one reaches maximum capacity.

"The role of second airports has been well-established in several of the world's major capitals. Sydney is the key gateway for air traffic in-and-out of Australia and the benefits of having two major airports will be felt nationwide," he said in a statement.

"Airports are key pieces of infrastructure that facilitate a huge amount of economic activity, and they take a lot of time to plan and build."

Virgin Australia has also welcomed the choice of Badgerys Creek, but warns that a lot of work will need to be done to ensure the new airport is practical.

"Key factors that will be important in the success of a second airport include good access via public transport and motorway, low-cost airport infrastructure and proximity to a labour pool and relevant suppliers," the airline said in a statement.

Business welcomes western Sydney boost

For businesses outside the air transport sector, the news of a go-ahead for Badgerys Creek has been greeted positively.

The Federal Government has estimated that the construction of the new airport will create 4,000 jobs, while up to 35,000 more people could be employed as a result of the airport by 2035.

The Australian Industry Group says there should be a range of flow on benefits, including the possibility of new manufacturing and services industries opening around the area.

"From a business perspective, a second airport will drastically ease congestion which will result in falls in operating costs and improvements in productivity," said Ai Group NSW director Mark Goodsell.

"Not only will such a project result in contracts and jobs in infrastructure, transport links and airport operations, it will also support the economic ecosystem for new industries around aviation and defence logistics in western Sydney.

What it could mean for Sydney's west During construction, 1,529 jobs could be created over seven years

During construction, 1,529 jobs could be created over seven years By 2050 the airport could create between $11.6bn and $15.2bn additional economic activity

By 2050 the airport could create between $11.6bn and $15.2bn additional economic activity Once operating fully, the airport would generate between 16,252 and 20,013 jobs

Once operating fully, the airport would generate between 16,252 and 20,013 jobs The airport could create 35,216 to 46,285 full-time equivalent jobs by 2050 directly or indirectly Source: Economic impact of a Western Sydney Airport

The Sydney Business Chamber is also thinking big.

Western Sydney director David Borger, who has been a persistent advocate for a second airport at Badgerys Creek, sees the facility eventually catering for international flights.

"Our future is in Asia - we need access to those markets and we need to get people and goods to those centres," he said.

"Having an international airport at Badgerys Creek would be the best thing you could do to connect our region to those markets."

Mr Borger says the Federal Government should also avoid rushing into commitments around night time curfews, such as the one which operates between 11:00pm and 6:00am at Kingsford Smith.

"Curfews are rare around the world, most airports don't have curfews. Melbourne's two airports don't have a curfew," he said.

"We shouldn't try and crush this before the approvals process has been looked at or the infrastructure has been looked at. Let's not rule things out too early."