Success or Failure of Privatized Airports - A Case Study

According to the FAA, commercial airports in the country are mostly parts of the national airport system that are managed by the states, cities or authorities controlled by the public Privatization refers to the transfers of government-controlled responsibilities and function to the private sector. In relation to the airports, this includes shifting the whole airport ownership or operations to the private sector. The Federal Aviation Reauthorization Act of 1996 established a program to test the increased private involvement through capital investments in airport developments, improvements, and operations. Most airports in the US are owned by state and local governments as static utilities to benefit the citizens and not businesses only with few exemptions such as Albany International who have entered long-term agreements with the private sector to take over overall management and operations of the airport.

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U.S airports relying on government support have attempted to collaborate with the private sector to improve their services, control their costs, and make their operation look more businesslike. Some of these airports have applied to the program presenting their proposals to privatize. However, most airports pulled out with only two proving to be successful.

One of the successful is Hendry County Airglade Airport, which is a general aviation reliever airport in Clewiston, Florida. Hendry County owns and operates the airport. A negotiation with a private operator is ongoing after the FAA approved its proposal.

Luis Munoz Marin International Airport was also successful in its application after the FAA approved the Puerto Rico Ports Authority preliminary application for the airport in 2009. Aerostar Airport Holdings was declared the winner of a bidding process held publicly to become the operator of the Luis Munoz Marin International Airport. Its final application to privatize the airport was approved for a forty-year agreement after a public hearing by FAA.Many airports lacked the interest in the program due to restrictive Airport Classifications eligibility and approval set by the FAA and its time consuming processes involved which presented risks in transactional closures.

Chicago Midway Airport was not a success after the conditions it had laid out could not be accomplished. It had laid out high standards that would ensure fair and equitable deal to the taxpayers, airlines, workers, and the passengers. The city of Chicago was committed throughout but withdrew its preliminary application to privatize Midway International Airport.

Privatization of airport has huge benefits due to its potential in increasing efficiency in the airport, increased customer service, and revenues to the local governments. Improvement in financial performance due to funding of capital improvements by the private sector will be realized with reduction in operations expenses.

Privatizations of airport do present harmful impacts. Public interests would reduce significantly due to reduced accountability to the public over its running and facilities control. Investors in the private sectors charged with airport control may increase rates and charges to the users and tenants in the airport, which may not serve to the best interest to the general persons. Unions representing workers and employees in these airports may have difficulties with the private operators due to the realignment and changes in management. Bankruptcy may be a challenge to some private operators in case of high cost of operations, which may lead to local, or state governments purchasing the airports. In conclusion, though privatization may have huge benefits, there will be risks accompanying it and therefore should be considered carefully before implementation to avoid losses that could affect people and the government.

References

Donald and Sharon. PRIVATIZATION IN U.S. AIRPORTS. 1st ed. 2010. Web. 21 Aug. 2015

Faa.gov,. 'Airport Privatization Pilot Program Airports'. Web. 21 Aug. 2015.

Luis, M. Camargo. 'Airport Privatization Movement In The 21St Century'. Opensiuc.lib.siu.edu. N.p., 22 Aug. 2015.

Privatization - Lesson Learned By State And Government. 1st ed. 1997. Web. 22 Aug. 2015.