Airport privatization pilot programs in the United States

Airport Privatization Pilot Program

The aim of this paper is to discuss and analyze airport privatization pilot program in the lights of broad and diverse academic resources. The airport privatization program is currently in its pilot phase in United States of America and other parts of the world. The pending reauthorization from FAA along with policy makers are now analyzing and investigation the importance, benefits and advantages of Privatization Pilot Program.

The term privatization means the transference of ownership from the public domain to the private sector. Airport privatization means the transference of power, authority and ownership from the public sector to the private sector. Research suggests that privatization of airports has not gained significant attention (Clifford, 2008). Despite lack of enthusiasm, private air companies have significantly contributed towards the management, organization and structuring of airports. The private sector from the aviation industry includes airline companies, providers of ground transportation, rental car providers, etc.

Massive deals have been made by private and public sector in order to manage and structure airport operations and functions. One such example is of John F. Kennedy's International Airport, where private company has been hired to look after and manage the operations at Terminal 4. At the same time, Indianapolis International Airport authority has allowed private organizations to manage and operate it. In United States, Stewart International Airport, which is located in Newburg, had become a private airport (Clifford, 2008). In the year 1996, the FAA passed out the Federal Aviation Reauthorization Act. In this act, five airport privatization pilot programs were commenced in order to analyze and investigate the importance and benefits of private airports and how successful and efficient they were in managing airport operations (Craig, 2006).

Privatization Reauthorization and its Benefits

In order to understand the significance and benefits of privatization of airports and how the pending FAA reauthorization can make airports much easier and efficient, it is essential to understand the concept of privatization and how it emerged. During the twenties, significant developments had been made in developing the aviation industry (de Newville, 2009). During this time, majority of the airlines were commercial and the airports were in the hands of the federal or local governments. The early contributors included United Airport located in Burbank, Grand Central Airport located in Glendale, etc. During this time, private companies did not show interest in investing in airports as the number of these companies was limited. It should be noted that the authorities in charge of management of airports have autonomous structure and system of governance, which allows them to take full control of the organization, controlling internal politics, financial system, etc. (De Wit, 2006).

From international perspective, it should be noted that the majority of the airports were owned by local governments. However, majority of the international airports that were run by local government did not reap benefits from inexpensive revenue bond," which were readily available (De Wit, 2006). This created an intense competitive environment. This made it difficult for the governments to persevere their assets and thus, they did not have sufficient funds to upgrade airports. For this purpose, the next solution was the corporatization of airports.

To generate revenues, private corporate were invited to make investments. The main shareholders were the local governments. The financial system and structure of the organization was that of private corporate, whereas the power remained in the hands of the government entity (Forsyth, 2004). The next trend that emerged in the aviation industry was the privatization of airports. Both of these approaches have been used extensively in order to generate revenues and to improve and enhance the airport functions and improving overall efficiency of the organization.

The transference of ownership has been proven to be beneficial in improving the overall efficiency of the airport and enhancing productivity, while, at the same time, meeting the demands of stakeholders. These benefits of privatization can create lucrative opportunities for the investor and assist in accommodating more flights. This would assist in generating revenues.

The privatization of airports started during the eighties, when Airport Authority of Britain, merged six airports into BAA plc. Privatization of airports commenced in Australia, Argentina, Europe, etc. (Forsyth, 2004). In Europe, low cost airlines were further promoted privatization in the region and thus, several private airports were developed. European Union had also drafted policies, which aimed at promoting private airports. The development of private airports assists the government to use the limited resources in improving other domains including health services, social services and other services provided by the government. In France, privatization is also encouraged to effectively manage airports and to provide health and social services to its people (Clifford, 2008). In United States, airports are mostly public organizations and the sponsors do not have to give tax. Furthermore, the Federal Airport Improvement Program allows them to have access to finance. In the year 1996, the FAA passed out the Federal Aviation Reauthorization Act. In this act, five airport privatization pilot programs were commenced in order to analyze and investigate the importance and benefits of private airports and how successful and efficient they were in managing airport operations.

Analysis

Airport privatization means the transference of power, authority and ownership from the public sector to the private sector. Research suggests that privatization of airports has not gained significant attention. From international perspective, it should be noted that the majority of the airports were owned by local governments. However, majority of the international airports that were not capable enough to deal with the new forces, which created an intense competitive environment. This made it difficult for the governments to persevere their assets and thus, they did not have sufficient funds to upgrade airports. For this purpose, the next solution was the corporatization of airports (de Neufville, 2009). The privatization of airports started during the eighties, when Airport Authority of Britain, merged six airports into BAA plc. Privatization of airports commenced in Australia, Argentina, Europe, etc. In Europe, low cost airlines were further promoted privatization in the region and thus, several private airports were developed. European Union had also drafted policies, which aimed at promoting private airports. The development of private airports assists the government to use the limited resources in improving other domains including health services, social services and other services provided by the government. In France, privatization is also encouraged to effectively manage airports and to provide health and social services to its people.

Conclusion

Airport privatization has been promoted all over the world. In United States, the pending FAA reauthorization to privatize airports can help in generating revenues and at the same time, allowing the government to use limited resources on improving health and social services. Furthermore, privatization would assist in improving and managing operations and improving the overall structure of the organization.

References:

Clifford Winston, Gines de Rus, (2008). Aviation Infrastructure Performance: A Study in Comparative Political Economy. Washington, DC: The Brookings Institution.

Craig, Eleanor (2006). "The Benefits and Costs of Airport Privatization." In Privatizing Transportation Systems, ed. Simon Hakim, et. al, 87-97. Westport, CT: Prager Publishers.

De Neufville, Richard (2009). Airport Privatization: Issues for the United States. Technology and Policy Program, Massachusetts Institute of Technology, Cambridge, MA.

De Wit, Japp (2006). "Privatisation and Regulation of Amsterdam Airport," in Forsyth, Peter., ed. The Economic Regulation of Airports. Aldershot: Ashgate Publishing Limited.

Forsyth, Peter. (2004). The Economic Regulation of Airports. Aldershot: Ashgate Publishing Limited.

Gomez-Ibanez, Jose and John R. Meyer. (2007). Going Private: The International Experience with TransportPrivatization. Washington, DC: The Brookings Institution.

Graham, Anne. (2008). "The Regulation of U.S. Airports." In Forsyth, Peter, ed. et al., The Economic Regulation of Airports: Recent Developments in Australasia, North America and Europe (Hants: Ashgate Publishing Limited.