What’s all the Buzz about Airport Privatization?

-The Pros and Cons of Public vs. Private Ownership

On September 9, 2013, the City of Chicago withdrew its preliminary application for the privatization of Chicago Midway International Airport. There is now one slot available for a large hub airport under the FAA’s Airport Privatization Pilot Program.

Under the program, private companies may own, manage, lease and develop public airports, according to the FAA website. In an effort to generate access to various sources of private capital for airport improvement and development, the Act authorizes the FAA to allow up to ten public airport sponsors to sell or lease an airport to a private entity, meanwhile exempting the public airport sponsor from certain federal requirements.

There are pros and cons to public vs. private airport ownership. In a forum discussion on the popular aviation website, airliners.net, one participant raised one point regarding public ownership. His comment was that private ownership is more efficient and less bureaucratic. Another described the government influence in airport management as a provider of stability and balance.

Partial private ownership is not uncommon. Many airports privatize only portions of their facility and operations to the private sector. Dozens of airports privatize their concessions programs to companies experienced in concession management. In fact, JFK’s brand new Terminal 4 is the first terminal at the airport to not be operated by an airline or the Port Authority New York and New Jersey, representing an interesting departure toward self-management.

What happened at Midway?

According to a Chicago Tribune article online, privatizing Midway Airport under the FAA’s pilot program would have raised more than $1.4b toward Midway debt. The mayor indicated that the process should be competitive allowing for an outcome that best benefits the citizens of Chicago. When one of two parties interested in Midway backed out, the process was no longer competitive.

As of August 2013, there were two active applications in the privatization pilot program, according to the FAA website.

Luís Muñoz Marín International Airport (Final Application Approved February 2013)

 “Puerto Rico’s government selected Aerostar Airport Holdings LLC in a deal worth $2.57 billion to run its Luis Munoz Marin International Airport, the largest in the Caribbean,” Gov. Luis Fortuno said. –Reuters

Hendry County Airglades Airport

“LABELLE, FL. — The Hendry County commissioners last week voted 4-0 to go ahead with spending more money  for legal work on the possibility of turning over the Airglades Airport in central Hendry county to the private interests of U.S. Sugar, Joe Hilliard, and a principal of a new company originally formed to buy the airport property, Florida Cargo Fresh, Inc.” –Southwest Florida Online

Gary/Chicago International Airport

My third example would be Gary/Chicago International Airport. In a statement on the airport’s website, Gary Mayor, Karen Freeman-Wilson announced, “A public-private partnership is the right growth strategy for the tri-state region’s third largest airport… It creates jobs through private sector investment, maintains local public control and attracts economic development in the area from around the world.”

“GARY — A joint city/airport committee has recommended two bidders out of an original field of 10 for further negotiations to privatize the management and real estate development at Gary/Chicago International Airport.”            –nwi.com

The outcome of Gary/Chicago International’s efforts could shape future privatization ambitions, especially in the United States, above all if the FAA pilot program hits pause on current federal regulations for private-run airports.