Private participation in airport development: Experts not enthusiastic

Private participation in airport development: Experts not enthusiastic

Global investors have little or no experience in developing or operating airports.

With government aiming at greater private participation in airport development,industry experts have sounded a word of caution with some pointing out that successful privatisation cannot be measured solely on how much money the government generates out of it.

They also pointed out that most global investors have “little or no experience” in developing or operating airports. With global economic conditions remaining uncertain,governments across the world were more reluctant to spend cash on infrastructure development and hence sought more private participation,the experts said.

Their views came amid a growing focus by the government on developing non-metro airports through greater private sector involvement to promote regional connectivity in India.

“Ultimately,a successful privatisation cannot be measured solely on how much money can be generated for the government. It must be seen as part of a long-term vision for economic development,” said aviation expert Charles Tyler in an article in IATA’s journal ‘Airlines International’.


Pointing out that there was “no shortage of bidders” for major international airport privatisations,he said,however,in many cases,the companies putting up the cash have little or no experience of developing and operating airports.

“Pension and investment funds have been looking at airports as investment opportunities,for example. In one case,a bidder for a low-cost airport was the country’s leading coffee shop operator,” Tyler said.Peter Cerda,IATA’s director of Safety,Operations and Infrastructure (Americas and Atlantic),said,”There are many unknowns in the aviation industry and boom times can suddenly turn to busts.

“Sometimes (there was) a certain naivety on both sides,with governments and concession companies alike thinking that aviation is glamorous and a free ticket to making money.” “At times,you might be forgiven for wondering if the concession company has really done its due diligence,” Cerdawas quoted as saying in the article.

“With a good,transparent process in place,we have no problem with the concession model,” he said,adding,”We would like to see much more open dialogue between the parties involved,including the airline users”. David Stewart,IATA’s head of Airport Development,said though airport and airline business were not rocket science,”There is actually a lot of evidence to suggest that airport business is rather different from many other large infrastructure projects. Too many errors of judgement have been made by companies coming in from other industries to run airports.”

Citing the example of London Heathrow,he said when the new owners took over in 2006,”They did not seem to fully understand that there was a need to redevelop the existing terminal infrastructure without any scope to meaningfully increase the airport’s overall capacity (due to the fact that the runway system was saturated).

“Their experience was previously limited to other types of infrastructure projects. Airports often prove to be more complicated.”The experts stressed the need to have “a strong regulator and clear service level agreements” in place.

This requires better collaboration between governments,potential concession companies and airline users well before the privatisation takes place,Tyler said.