NCPA - National Center for Policy Analysis

Airport Privatization

April 17, 2000

One reason today's airline service leaves much to be desired is that airline entrepreneurs seeking to compete with established airlines have difficulty obtaining gates. Typically, U.S. airports sign long-term gate-lease agreements with the major incumbent airlines, assuring a revenue stream to pay off the bonds they issue to build the terminal facilities. But usually the agreements give the airlines what amounts to a veto power over any terminal expansions.

By contrast, at most of the more than 100 privatized airports elsewhere in the world, the gates remain under the control of the airport company, and are allocated hour by hour to individual airlines as needed.

  • At many European airports, and at the privately run Terminal 3 in Toronto, the airline signage at each gate is electronic, so that it can be changed in moments from one airline's name to another.
  • That is how gates will be managed at the new International Arrivals Terminal at JFK in New York - a $1 billion project being developed and operated by a private consortium including the for-profit company that owns and operates Amsterdam's Schiphol Airport.
  • The consortium is taking the entire risk of keeping the gates occupied, because it wants the management flexibility to get the most value out of each gate.

One way to shift to a new management philosophy for U.S. airports would be to privatize them, turning them into corporate entities charged with making a profit and paying ordinary business taxes on those profits. The existing government owner would be the sole shareholder at the outset, but would be free to sell some or all of its shares (i.e., to privatize) if and when it decided that it made sense to do so. As for-profit businesses, corporatized airports would be subject, like all other businesses, to the antitrust laws. Gate-leasing practices that created artificial barriers to entry would be subject to legal challenge (which is generally not possible today, given airports' status as municipal agencies).

Source: Robert Poole Jr., "More Airline Competition - Yet Another Reason for Airport Privatization," e-brief No. 104, December 1999, Reason Public Policy Institute, 3415 S. Sepulveda Boulevard, Suite 400, Los Angeles, Calif. 09934, (310) 391-2245.

 

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