Sydney Airport has turned down the option to build and operate the city's second airport at Badgerys Creek, and so the federal government will step in to get it done.

"Despite the opportunities that Western Sydney Airport will present, the risks associated with the development and operation are considerable and endure for many decades, without commensurate returns for our investors," said Kerrie Mather, Managing Director and Chief Executive Officer at Sydney Airport.  Officials said they considered the likely demand and growth potential, construction costs, and financial return.  

But the federal government believes the project is necessary and is "well positioned to move forward", according to Prime Minister Malcolm Turnbull.

"It is a vitally important project for Western Sydney, for Sydney, and the nation, which is why the Coalition Government ended decades of indecision by committing to the project in 2014," said the PM in a statement.

Details of how the project will be funded will be announced in the federal budget on 9 May.