IATA and ACI contest the merits of airport privatisation

In the UK, most of the major airports have been privatised, and are now operated by limited companies. London Heathrow, for example, is owned by Spanish company Ferrovial, which also owns Aberdeen, Southampton and Glasgow International. The Peel Group owns Liverpool John Lennon Airport, among others.

Manchester Airport is operated by the Manchester Airports Group, a public holding company in which Manchester City Council owns a 35.5% stake, the nine other metropolitan borough councils of Greater Manchester own a total of 29%, and Australian investment fund IFM Investors takes up the remainder.

This contrasts with airports in countries such as the US, where most of them are still fully owned and operated by the state.

The merits of airport privatisation have proved somewhat contentious. The general argument in favour is that it leads to improved investment and expansion of services and facilities, as commercially-run airports are not reliant on government funding. On the other hand, airports provide critical infrastructure that arguably needs more oversight, including price regulation, to prevent a tendency towards monopolisation.

Two organisations that represent some of the different perspectives in the debate are the International Air Transport Association (IATA) and the Airport Council International (ACI), representing airlines and airports respectively.

Speaking at an Annual General Meeting in June, Alexandre de Juniac, CEO and Director General of IATA, said, “We are in an infrastructure crisis. Cash-strapped governments are looking to the private sector to help develop much needed airport capacity. But it is wrong to assume that the private sector has all the answers.”

Noting that private sector airports are generally more expensive, but claiming that they have not yet lived up to their supposed benefits over the long term, de Juniac said, “Airports have significant market power. Effective regulation is critical to avoiding its abuse—particularly when run for profit by private sector interests.”

But Angela Gittens, Director General of the ACI, believes that private investment may be needed to deal with capacity constraints that are throttling economic development.

“ACI has a neutral position on airport ownership and does not suggest that airport privatization is the only suitable policy choice,” she said. “There is, however, a global need to finance new airport infrastructure to meet future demand and if government spending cannot be relied upon as it has been in the past then there is ample evidence of the value created by private investment in airports around the world.”

Gittens suggested that governments are better placed to set strategic objectives and to take a view on where airports could most add value, but that thorough analyses of successful private enterprises within an increasingly competitive market are required.

(Source: IATA, ACI)