Airport Privatization: Exceptional Transformation to Meet the Expected Growth in Air Travel Demand

Topics: Investment, Economics, Better Pages: 2 (497 words) Published: February 12, 2013
The airport industry is going through an exceptional transformation that has driven the market towards increasing levels of competition. Additionally, major investment programs are required to meet the expected growth in air travel demand (particularly in some emerging regions, such as Asia). However, governments and city airport authorities are becoming more reluctant to support airport projects, since they have major budgetary constraints.

Airports and airlines have historically been considered as essential components of the national aviation system, and hence both were regarded as public utilities. Due to this approach, operational and handling activities were contemplated as being fundamental for the development of the airport business, and commercial activities had a less important role to play. For that reason, airport assets and property have always been publicly managed and commercial activities have occasionally been contracted or outsourced to private companies. The traditional airport management model becomes visibly unsustainable when most governments begin to be concerned about the burden of airport financing and its lack of efficiency. However, for many years, a majority of airports around the world have continued to operate under this model and some still remain attached to it. Since the 1980s, the industry started to evolve with changes being brought about in the traditional airport management model. Currently, governments are progressively regarding airports as potential profit-making enterprises rather than merely considering them as part of the infrastructure suppliers.

For existing airports, the simplest form of privatization is contracting out management of the airport on a relatively short-term basis. Larger economic benefits can generally be obtained via a long-term lease or sale of the airport, increasingly common overseas. To create new airport facilities (or entirely new airports), the private sector can be granted either a...
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