Policy Study

Expanding Airport Capacity

Getting Privatization Off The Ground

Executive Summary

The national air transportation system faces a tremendous challenge in the coming years. Airport congestion is already a serious problem, with delays at the most congested airports “rippling” through the air transportation system. Expected growth in the demand for air transportation will add to delays and reduce the overall reliability of air transportation. Unfortunately, developing new airports and airport facilities is a time-consuming, costly process, and there is minimal new development underway to meet the growing demand. Worse still, the current system suffers from an apparent shortage of capital to meet the airport system’s future financing needs.

Increased private involvement in infrastructure development has proven to be an effective remedy for similar problems in other modes of transportation, and the growing support at all levels of government is a reflection of this success. Unfortunately, federal airport policy has exhibited a clear bias against increasing private-sector involvement. This bias in federal airport policy is inconsistent with the April 30, 1992 Executive Order on privatization, overall federal transportation policy, and with Secretary Andrew Card’s stated support for airport privatization. Furthermore, by limiting local airport authorities’ ability to increase private involvement, the bias ultimately contributes to more-congested, less-efficient airports.

If it is to meet the coming challenges of congestion, long development times, and an apparent shortage of capital, the national air transportation system must be able to efficiently access the capabilities of both the public and private sectors. This will not happen unless federal airport policy is altered to remove the bias against private sector operation and ownership of airports. Federal policy needs to recognize that the private sector can safely and efficiently develop and operate airports, and allow local governments and authorities to make use of the private sector’s capabilities.

The ultimate need, however, is for the federal government to defer decisions on private involvement to state and local government. The decision on the appropriate level of private involvement should be made on a case-by-case basis depending on each airport’s unique circumstances, a decision which local governments and authorities are uniquely qualified to make. Federal policy should recognize this and allow local authorities to determine the appropriate level of private involvement (within broad guidelines). Implementation of the recent Executive Order could lead to improvements in federal airport policy, but until the current bias against private involvement is corrected, private involvement in airports will remain in a holding pattern, along with irate passengers.