News: UPDATE 1-Sydney Airport mulls new airport development as FY EBITDA rises 10.3 pct

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SYDNEY, Feb 16 (Reuters) - Sydney Airport Holdings Ltd (SYD) said on Thursday it expected to decide by May whether to take up its right to develop a A$5 billion airport in western Sydney after posting a 10.3 percent rise in full-year earnings before interest, tax, depreciation and amortisation.

EBITDA for the 12 months ended Dec. 31 rose to A$1.11 billion ($856.25 million) compared with A$1 billion a year ago, in line with the A$1.12 billion estimate of 13 analysts polled by Thomson Reuters I/B/E/S.

The company, operator of Australia's biggest airport, said it expected to pay distributions of A$0.335 per stapled security in 2017, up from A$0.31 last year, which was in line with analyst forecasts of A$0.337.

International traffic, the main earnings driver for Sydney Airport, rose by 8.9 percent - the highest rate in 12 years - in 2016 as airlines added capacity.

Sydney Airport on Thursday said there would be "significant challenges" in developing a new airport in Sydney's western suburbs without government aid, which is not on offer.

If Sydney Airport does not take up its development right, the government can build the airport itself or offer the development to other groups, such as pension funds and infrastructure funds, on the same terms they gave to Sydney Airport.

RBC Capital Markets analysts on Jan. 31 said the government would need to offer at least A$1 billion of funding to make the project attractive enough for Sydney Airport to develop it. ($1 = 1.2963 Australian dollars)