Exclusively from Sydney | IATA opposes airport privatization
AeroTime exclusively from Sydney | The International Air Transport Association (IATA) has called against airport privatization, as private airports (compared to government-owned ones) are costlier for consumers, earn bigger profits, but fail to provide greater efficiency.
“Airports provide critical infrastructure. It is important that governments considering privatization or PPP [public-private partnerships] take a long-term view and focus on solutions that will maximize the economic and social benefits of connectivity. The aim of Airport Ownership and Regulation is to help governments make better-informed decisions using best-practices gleaned from decades of experience with the good, the bad and the ugly of airport privatizations,” said Alexandre de Juniac, IATA’s Director General and CEO.
“The global growth of airports is increasingly putting airports under pressure, increasing the need for governments to explore alternative financing solutions and enhance management efficiency," said Dorian Reece, Global Airport Lead at Deloitte. [...] "Whatever ownership or operating model is applied, governments, investors and aviation stakeholders need to put the end-consumer central to the selection of the optimal solution”.
The spectrum of airport privatization options is ranging from full government ownership, to forms of corporatization, hybrid models (e.g. service/management contracts); and to those with greater private participation (e.g. equity sales, concessions and full divestiture).
A competitive and transparent transaction process is a “must have” to assure public value for money, according to IATA. Governments must assure that bids are assessed on balanced criteria and that the key terms of any concession contract ensure improvement in efficiency, quality of service and appropriate investment in the airport for the airlines and the end-consumers.
The assessment of an airport’s market power and the development of the appropriate regulatory framework should take place in parallel with an assessment of potential ownership and operating models.
Economic regulation is needed to prevent market abuse, secure efficiencies and ensure service quality. When combined with limited or weak economic regulation, all models (private or public) can lead to adverse outcomes; however, there are additional risks with airports that have private ownership.
Best practice indicates that regulators must be centralized, appropriately funded, independent, have a clearly defined mandate; and be endorsed by governments and defined in legislation. Regular assessment of an airport’s market power is needed to ensure that the regulatory function remains fit-for-purpose.
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