The privatization of airports is not always the best option, according to the International Air Transport Association (IATA), which called on governments during its 74th Annual General Meeting (AGM) in Sydney on June 3-5, to place priority on balancing the interests of consumers, airlines, investors, citizens and economies.
“Selling airport assets for a short-term cash injection to the treasury is a mistake,” said Alexandre de Juniac, IATA director general and CEO after members unanimously passed a resolution earlier this month urging governments to examine all options carefully before proceeding with the privatization of airports.
“Airports have significant market power. Effective regulation is critical to avoiding its abuse – particularly when run for profit by private sector interests,” said de Juniac, who also noted that five of the top six passenger-ranked airports by Skytrax are in public hands.
More specifically, the resolution calls for decision-makers to focus on the long-term economic and social benefits of an effective airport; learn from positive experiences with corporatization, new financing models, and alternative ways of tapping private sector participation; make informed decisions on ownership and operating models to best protect consumer interests; and locking in the benefits of competitive airport infrastructure with rigorous regulation.
At the same time, governments can safeguard consumer interests by implementing robust regulatory frameworks to ensure cost efficiency in charges and improvements in investments and service levels; performance improvements could be set in consultation with airport users and consumers; periodic monitoring of airport privatization can be achieved through public consultation, with corrective action taken to ensure benefits are realized for the passengers, for airlines and for cargo consumers.
Approximately 14 percent of the world’s airports have some level of privatization, handling about 40 percent of global traffic.
“We are in an infrastructure crisis. Cash-strapped governments are looking to the private sector to help develop much needed airport capacity. But it is wrong to assume that the private sector has all the answers,” said de Juniac.
“Airlines have not yet experienced an airport privatization that has fully lived up to its promised benefits over the long term,” the chief of IATA added.
De Juniac went on to note that there was no one-size-fits-all solution, adding that there was a broad range of ownership operating models available “that can meet a government’s strategic objectives without a transfer of control or ownership to the private sector”, while at the same time safeguarding consumer interests.
“Globally, many of the most successful airports are operated as corporatized entities of governments. Governments need to evaluate the pros and cons of different models taking into account interests of all stakeholders, including airlines and customers. The most important thing is that airports meet the needs of customers and airport infrastructure users, at a fair price. And to do that, user consultation must be an integral part of the consideration process,” said de Juniac.
“Efficient and economical air transport contributes directly to a community’s prosperity. Poorly thought-out airport privatizations put this at risk. The balancing role of effective and strong economic regulation is essential,” said de Juniac.
Korean Air will host the 75th IATA AGM and World Air Transport Summit in Seoul, South Korea on June 2-4, 2019.