Policy Study

Passenger-Friendly Airports

Another Reason for Airport Privatization

Executive Summary

Since the privatization of the British Airports Authority in 1987, over 20 countries have privatized airports by means of equity divestitures, leases, and incentive-laden management contracts. After more than a decade of experience, many of the benefits of airport privatization are becoming more discernible:

  • Capital infusion: Privatization enables airports to raise additional capital and avoid potentially severe congestion due to funding constraints.
  • Cost savings: Privatization brings gains in efficiency by means of effective cost management.
  • Revenue windfall: Privatization provides governments with budget relief generated from the proceeds of the sale or lease of airports.
  • Passenger-friendliness: Privatization stimulates a managerial culture at airports which is highly responsive to passenger needs.

Recognizing some of these benefits, Congress approved a pilot privatization program in 1996 to test the waters. After one year of operation, the pilot program has raised a few eyebrows in the aviation community -a good thing, if only to keep sleepy eyes open. However, despite numerous backroom discussions and boardroom conferences on the topic, there have been only a few applications to participate in the program.

One of the reasons for this sluggish satisfaction with the status quo is a failure to recognize the common ground in the privatization debate. Detecting common ground requires identifying objectives of airport privatization which are desired by all of the key players in the debate-airlines, government officials, and the traveling public. This report identifies, measures, and analyses one shared objective of privatization: passenger-friendliness (defined more formally as passenger-responsiveness). For all three stakeholder groups, creating a managerial culture which is responsive to passenger needs at airports is a highly desirable common goal.

This study assesses whether privatized airport ownership has an impact on passenger-responsiveness. It has not been entirely clear that passengers, who often have little choice but to use their local airport, will always benefit from privatization in its various forms-divestiture, leases and management contracts. But as a result of overseas airport privatization trends, it is now possible to find evidence to examine this issue. Consequently, this study presents the results of a 50-item survey administered to airport managers worldwide. Passenger-responsiveness is a scaled measure of the extent to which an airport adopts a managerial culture which emphasizes serving passengers. Responses from 201 airports in 67 countries are analyzed. (The sample includes 54 airports in the United States.) This represents one of the most comprehensive and international studies of managerial culture in the airport industry conducted to date.

Based on results of the empirical analysis, the main conclusions of this report are as follows:

  • Privatization matters: privatized airports have a significantly higher level of passenger-responsiveness than government-owned airports.
  • Privatization matters, in all its forms: this relationship holds for both types of airport privatization: equity divestiture and private sector leases/management contracts.
  • Common ground exists: given that privatization leads to a more responsive managerial culture desired by all stakeholders, state and local officials should emphasize, in their negotiations with airlines, that delaying privatization does a disservice to all parties, especially the traveling public.