From government management and ownership to professionally managed and publicly traded airport organizations

Abstract

As a result of the deregulation of the air transport industry in the United States and Europe, and the globalization of the world's economy, governments have being facing important challenges to meet the demands of a growing and changing air transport sector. The participation of private investors and private management in the ownership and operation of airports has become an important element in the effort to satisfy these demands. The flexibility, efficiency, and innovation capabilities provided by a privately managed airport organization are widely accepted. However, the airport privatization movement around the world has being struggling with the problem of resolving the natural conflict between the interests of private investors and those of the public at large. This conflict is exacerbated by the fact that airports, to a greater or lesser extent, are natural monopolies when it comes to services for originating and terminating passengers. Although there is no perfect substitute for a competitive environment, an effective approach is to design and implement an economic regulation mechanism that, on the one hand, makes it possible to achieve the advantages of a privately managed organization, and on the other, protects the public interest. A more democratic stockholders' structure, through a publicly traded and professionally managed organization, can also be very useful in this respect. This thesis begins by presenting a quite detailed overview of the airport privatization movement around the world. Then, it addresses the basic regulatory issues that should be considered in designing and implementing the mechanisms that can facilitate a smooth transfer of airport activities to the private sector. The case of the Southeast Airport Group, as part of the Mexican airport privatization process, is used to illustrate many of these issues. There is some practical evidence to the effect that government regulation at major airports has achieved the objective of protecting airport users from monopolistic pricing of facilities and services. It is, however, important that the future economic regulation addresses objectives that go beyond pricing. These include the proper incentives for making timely investments in increasing airport capacity, as well as ensuring safety, security and an adequate level of service. Although, the events of September 11, 2001 will have a deep impact on the air travel industry, it is expected that the airport privatization movement around the world will manage to sustain its current momentum.