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Considering and Evaluating Airport Privatization (2012)

Chapter: Chapter 1 - Summary

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Suggested Citation:"Chapter 1 - Summary." National Academies of Sciences, Engineering, and Medicine. 2012. Considering and Evaluating Airport Privatization. Washington, DC: The National Academies Press. doi: 10.17226/22786.
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Suggested Citation:"Chapter 1 - Summary." National Academies of Sciences, Engineering, and Medicine. 2012. Considering and Evaluating Airport Privatization. Washington, DC: The National Academies Press. doi: 10.17226/22786.
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Suggested Citation:"Chapter 1 - Summary." National Academies of Sciences, Engineering, and Medicine. 2012. Considering and Evaluating Airport Privatization. Washington, DC: The National Academies Press. doi: 10.17226/22786.
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Suggested Citation:"Chapter 1 - Summary." National Academies of Sciences, Engineering, and Medicine. 2012. Considering and Evaluating Airport Privatization. Washington, DC: The National Academies Press. doi: 10.17226/22786.
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Suggested Citation:"Chapter 1 - Summary." National Academies of Sciences, Engineering, and Medicine. 2012. Considering and Evaluating Airport Privatization. Washington, DC: The National Academies Press. doi: 10.17226/22786.
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Suggested Citation:"Chapter 1 - Summary." National Academies of Sciences, Engineering, and Medicine. 2012. Considering and Evaluating Airport Privatization. Washington, DC: The National Academies Press. doi: 10.17226/22786.
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Suggested Citation:"Chapter 1 - Summary." National Academies of Sciences, Engineering, and Medicine. 2012. Considering and Evaluating Airport Privatization. Washington, DC: The National Academies Press. doi: 10.17226/22786.
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Suggested Citation:"Chapter 1 - Summary." National Academies of Sciences, Engineering, and Medicine. 2012. Considering and Evaluating Airport Privatization. Washington, DC: The National Academies Press. doi: 10.17226/22786.
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Suggested Citation:"Chapter 1 - Summary." National Academies of Sciences, Engineering, and Medicine. 2012. Considering and Evaluating Airport Privatization. Washington, DC: The National Academies Press. doi: 10.17226/22786.
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1 1.1 Purpose and Objectives of Guidebook Local and regional governments continue to look for ways to make their airports as efficient, competitive, and finan- cially viable as possible, as well as ways to maximize the com- munity’s return from their airport assets. Communities have and continue to promote private sector participation in air- ports in pursuit of these goals. Consideration by communi- ties, governing boards, airport officials, airlines, investors, and other stakeholders on whether to enlist or expand private sector participation in an airport can be a significant decision with long-term consequences. The objective of this research is to develop a guidebook on airport privatization that assists U.S. airport owners, policy makers, and other relevant stakeholders as they consider and analyze the potential advantages and disadvantages of implementing various approaches to airport privatization. The guidebook is intended to be a comprehensive resource that summarizes in a concise and easy-to-understand for- mat the various options for private sector involvement in the operation, management, and financing of airports in the United States and provide the tools necessary to evaluate such options to make sound decisions about potential priva- tization initiatives. Because the goals, objectives, opportunities, strategic pri- orities, and challenges differ from one airport sponsor to another, each situation should be evaluated on its own merits. Moreover, the decision to privatize is often made in a broader context by the policy makers or the airport owner. Privatization does not have to be an all-or-nothing solu- tion; the airport owner can choose to privatize portions of an airport’s management and operation. The guidebook identi- fies and outlines realistic options and highlights a variety of successful and unsuccessful privatization initiatives through case studies examples. The decision matrix in the guidebook helps a community and an airport owner identify and evaluate the appropriate ways to enlist the support of the private sector given its unique situation. 1.2 Privatization Motivations and Drivers The potential benefits of airport privatization have been identified to include: (1) access private capital for develop- ment, (2) extract an upfront or ongoing payment for the air- port asset (monetize the asset), (3) stimulate air service and airline competition, (4) introduce more innovation and cre- ativity, including entrepreneurial ideas in the development of nonairline revenue, (5) secure long-term efficiencies in opera- tion and maintenance and enhance customer service, (6) shift the risk of debt, capital development, and/or operations to the private sector, (7) accelerate project delivery and reduce con- struction costs, (8) reduce reliance on general tax levies, and (9) de-politicize airport decision making (Figure 1.1). 1.3 Generic Privatization Models Privatization refers to the shifting of governmental func- tions, responsibilities, control, and in some cases ownership, in whole or in part, to the private sector. The term “airport privatization” is often understood to mean the transfer of an entire airport to private operation and/or ownership, but pri- vate sector involvement at airports can take many forms. Figure 1.2 illustrates the potential range of strategies avail- able for private sector participation in airport management, operation, and development under four generic privatiza- tion models. The range extends from the least level of private involvement to the most private sector involvement. A critical distinction is made between: • Partial Privatization—Partial privatization refers to strate- gies where partial control and at least a portion of ownership remains with the public owner. C h a p t e r 1 Summary

2• Full Privatization—Full privatization refers to strate- gies where the complete control and/or operation of an entire airport are vested with a private entity through a long-term lease or sale (either under or outside the Airport Privatization Pilot Program or APPP).1 1.4 Examples of Specific Strategies Figure 1.3 shows examples for specific strategies within each privatization model, which are presented in more detail in each respective chapter. 1.4.1 Service Contracts Contracting services or outsourcing refers to the delega- tion of non-core operations from the public sector to a pri- vate entity that specializes in the operation, maintenance, or management of that activity. Although most U.S. airports outsource at least some services or functions, a number of airports have been considering more extensive opportunities for outsourcing of functions such as fire services currently provided by many municipal departments. Examples for outsourcing services are shown in Table 1.1. 1.4.2 Management Contracts Airport owners can contract out the management and operation of parking facilities, terminal concessions, ter- minal operations, reliever airports, or their entire airport system to private operators. Management contracts for park- ing operations are particularly prevalent. Contracts for the management of an airport or airport system exist at large and small facilities. At general aviation airports, the airport man- agement company also may serve as the fixed-base operator, providing aeronautical products and services to airport ten- ants and users. An example of the allocation of responsibilities and control for a full airport system management contract can be found in the Indianapolis Airport Authority case study (see Chapter 9 and Appendix H). The scope of services for the Indianapolis contractor was organized into three components, with func- tions as summarized in Table 1.2. In Indianapolis, the contractor was charged with admin- istering and enforcing all agreements maintained by the air- port authority, subject to the policy decisions of the board. The contractor was responsible for managing the implemen- tation of capital improvements, subject to approval by the board and any other responsible parties (e.g., the FAA) in compliance with all governmental regulations. The airport authority retained under its control the fol- lowing functions: • Airline use agreement compliance • Compliance with the authority’s obligations under the law and under federal grant agreements • Air service development policy • Debt issuance policy • Rates and charges policy • Long-range planning • Land acquisition and development policy and planning • Airport industrial and economic development policy • Environmental policy • Capital expenditure policy and implementation of capital improvements Innovation/ organizational change Sale proceeds Competition/ market stimulation Risk transfer Efficiency gains/ customer focus Privatization Drivers Capital funding Figure 1.1. Key motives to privatize. 1The Airport Privatization Pilot Program was created to test a new method for increasing private participation, and especially private capital, in airport operations and development. Through legislation enacted in 1996 and amended in 2003 and 2012, Congress lowered sev- eral barriers to privatization that had been identified during a debate on the subject, including the prohibition on revenue diversion. Congress limited the scope of the program and imposed certain conditions on approval, and the FAA later adopted procedural requirements for appli- cants seeking to participate in the program. Please see Chapter 6 for a detailed description. Partial Privatization Full Privatization LEAST PRIVATIZATION Service Contracts Management Contracts Developer Financing and Operation Long-term Lease or Sale (including Airport Privatization Pilot Program) Private Airport Ownership or Development MOST PRIVATIZATION Private Development Figure 1.2. Airport privatization continuum generic models.

3 • Airport Privatization Pilot Program • Long-term lease for full operation and development Upfront Payment Exit Airport Business • Cleaning/janitorial • Conveyance systems • ARFF • Security guards • Common use equipment • Parking operations • Terminal concessions • Commercial land development Cost Reduction Specialized Expertise • Terminal development • Fuel systems • Cargo • Rental car • General aviation • Solar Capital Investment • Specific facility (e.g., parking) • Airport-wide management Management Expertise Service Contracts Developer Financing/Operation Management Contracts Long-Term Lease or Sale • Manchester • SFOTEC • Pittsburgh • Indianapolis • Albany • LA County airports • JFK-IAT Terminal 4 • BOSFuel • Austin rental car • Chicago Midway • Stewart • Morristown Figure 1.3. Examples of privatization strategies. Traditional Less Typical Maintenance services (e.g., janitorial, window cleaning, landscaping) Conveyance systems (e.g., elevators, escalators, moving walkways) Mechanical systems (e.g., HVAC) Airline equipment (e.g., baggage systems, jetways, pre-conditioned air, common use equipment) People mover systems Shuttle bus operations Financial planning Financial advisory Planning studies (e.g., master plans) Architectural, engineering, design Construction inspection Construction management Program management Terminal concession management Commercial land development agents Aircraft rescue and firefighting services (ARFF) Law enforcement Security guards Table 1.1. Examples of outsourced services. Terminal Services Airfield Support Services Administrative Support Services Terminal maintenance and janitorial Terminal operation Terminal concessions Parking and rental car Terminal advertising Grounds maintenance Terminal security Planning and engineering for terminal Terminal land development Airfield maintenance/snow removal Ramp operations Airfield signage/navigation Fire and rescue Reliever and general aviation airports and heliport Non-terminal buildings maintenance FBO and general aviation facilities maintenance Vehicle maintenance Intermodal and cargo support Airfield planning and engineering De-icing Airside land development Airside security Fuel farms and fill stands Finance and accounting Grant management Management information systems Public relations, including noise abatement programs Human resources management Purchasing and contracts management Administration of bond issuance Administration of PFC collection and accounting Land acquisition and relocation implementation Legal Air service marketing, including freight Table 1.2. Airport-wide management contract responsibilities at Indianapolis.

41.4.3 Developer Financing and Operation There is a wide variety of developer financing and operation employed in the United States, including passenger terminals, parking garages, rental car facilities, fuel systems, cargo facili- ties, general aviation facilities, and other major facilities. The private sector can provide full-scale development, operation, and maintenance services and sometimes financing under long-term leases or concessions. Table 1.3 illustrates the range of project development privatization models with different degrees of control and risk for the airport owner. Variations and examples of the Design-Build-Operate- Maintain and Finance approach for airports include: • Public-Private Partnership for Terminal Development (e.g., JFKIAT Terminal 4) • Single Tenant Special Facility Terminal Lease (e.g., Terminal A at Boston) • Multi-Tenant Special Facility Terminal Lease (e.g., Terminal 5 at Chicago O’Hare) • Special Facility Fuel System Leases (e.g., San Francisco) • Second Party Cargo Development (e.g., Memphis) • Third Party Cargo Development (e.g., Pittsburgh) • Private Development of Consolidated Rental Car Facility (e.g., Anchorage) • Private Parking Development (e.g., Hartford) • Private Solar Development (e.g., Austin) 1.4.4 Full Privatization—Long-Term Lease or Sale Under the full privatization models, the airport owner enters into a long-term lease, long-term concession, or sale of an airport, which can be accomplished under the APPP or outside of the APPP. It is important to make a distinction between the main participants in this type of transaction— namely, the private entity that will be responsible for manag- ing and operating the airport and who typically does not make an equity investment, versus the lenders and investors who do invest in the transaction but have no role in day-to-day operations. For purposes of this guidebook, the term “private operator” is used to refer to an individual private entity or the team selected by the public airport owner to compensate the airport owner for the airport asset and to run the airport. • Under a long-term lease (or concession agreement), the airport owner grants full management and development control to the private operator in return for the operator undertaking capital improvements and other obligations (e.g., up-front payment, responsibility for outstanding debt, capital improvements). • Under a sale, the airport is transferred on a freehold basis with the requirement that it continue to be used for airport purposes. The distinctions between full privatization inside and out- side the APPP are described in detail in Chapter 6 and sum- marized in Table 1.4. 1.4.5 Private Airport Development There are examples of private investors funding the devel- opment of an airport without the benefit of federal or state grants. These airports are operated as for-profit businesses. Virtually all of these strategies have been employed for general aviation airports. Branson Airport is the only privately owned commercial passenger airport in the United States. However, private airport development without government support is not considered to be airport privatization for purposes of the guidebook since it does not involve the transfer of control or ownership from the public sector to the private sector. 1.5 Evaluation of Privatization Strategies Table 1.5 presents a high level summary of the various opportunities, advantages, and disadvantages of each priva- tization model, which are presented in more detail in each chapter. The reader should also refer to Tables 8.8 through 8.11 for potential ways to mitigate some of the disadvantages and risks. Transfer at End of Approach Design Build Operate & Maintain Finance Construction Lease Construction Manager at Risk ♦ ♦ ♦ Design-Build-Operate-Maintain ♦ ♦ ♦ ♦ Build-Transfer-Operate ♦ ♦ ♦ Build-Operate-Transfer ♦ ♦ ♦ ♦ Design-Build-Operate-Transfer ♦ ♦ ♦ ♦ Design-Build-Operate-Maintain and Finance ♦ ♦ ♦ ♦ ♦ Table 1.3. Alternative strategies for developer financing and operation.

5 Full Privatization Pursuant to Pilot Program (49 USC § 47134) Full Privatization Outside Pilot Program (FAA Order 5190.6B) E ligible Airports No more than 10 airports eligible to participate. Only one slot currently available for a non- large-hub airport. No cap on number or type of airports. Use of Sale Proceeds Public airport sponsor can request FAA approval to use sale proceeds for non-airport purposes. For primary airports, requires consent of 65% of airlines. For nonprimary airports, requires consultation with based aircraft owners. Sale proceeds must be used for airport purposes. Grant Repayment FAA ma y excuse public airport sponsor from any repayment obligation that may exist. FAA w ill excuse public airport sponsor from any repayment obligation that may exist. AIP – Entitlement Private operator is eligible for grants from the Entitlement Fund. Private operator is not eligible for grants from the Entitlement Fund. Rates and Charges Rates on airlines may not exceed inflation rate without consent of 65% of airlines. Rates on aircraft owners may not exceed percentage rate increase on airlines. Rates and charges must be reasonable and not unjustly discriminatory, pursuant to Grant Assurances. Private Operator’s Charges on Passengers Private operator is authorized to impose, collect and use a Passenger Facility Charge. Private operator is authorized to impose charges on passengers, subject to reasonableness and non-discrimination requirements of the Grant Assurances. Table 1.4. Comparison of full privatization under the APPP and outside the APPP. Opportunities and Advantages Disadvantages Service Contracts Accesses private sector expertise for specialized functions Applies private sector techniques to accelerate project delivery and reduce construction costs for capital improvements Provides potential to cut costs and optimize efficiency and thereby reduce costs to tenants Retains airport oversight of contracts to ensure compliance with airport goals Reduces airport costs for employee salaries and benefits as well as post retirement expenses and liability (pension, medical, etc.) Involves low implementation risk and complexity Allows airport management to focus on core and strategic issues Maintains airport owner control over land uses and facilities Could involve organizational disruption (i.e., reassignment or termination of existing employees) Could encounter labor resistance in an effort to protect and increase public sector jobs Requires careful monitoring, which can be expensive and time-consuming Presents tension in the outsourcing relationship – the contractor wants to make a profit and the airport owner wants to cut costs Table 1.5. Evaluation of privatization strategies. (continued on next page)

6Opportunities and Advantages Disadvantages Developer Financing and Operation Accesses private sector expertise for specialized functions and commercial development Reduces reliance on municipal debt and conserves public capital for those areas where public funding is the only alternative Transfers risk exposure for cost overruns, delays, and debt repayment to the private sector Has potential to reduce operating expenses and increase operational efficiencies due to avoidance of public procurement processes and to private sector motivations and incentives Attains the latest technical and managerial expertise for the infrastructure project Applies private sector techniques to accelerate project delivery and reduce construction costs Can enhance commercial development revenues Creates/retains jobs for the local economy Avoids unnecessary risks for airport owner Minimizes or eliminates delays from local procurement policies that tend to delay contract awards Has potential to provide low-cost facilities to tenants (especially when tax-exempt financing is employed) Limits administrative burden of airport and staffing responsibilities for facility financing, bidding, design, construction oversight, marketing, ongoing maintenance, administration, and management Allows airport management to focus on other strategic issues and assets Involves considerable time and effort for bidding process and negotiation of complex legal documents Requires that the project have a revenue stream to repay the debt Provides airport less control over the project and facility management Loss of control over the development site and future capacity expansion Loss of flexibility to change land uses over period of lease Less control over types of activities and quality and appearance Involves considerable upfront planning, time, and expense Involves moderate implementation risk Less control of facility utilization especially under airline-financed terminals that run the risk of inefficient utilization of gates and associated terminal space Could involve organizational disruption and need to reassign or terminate existing employees Could involve buyouts and compensation for existing public workers Involves long-term risk if the project encounters financial problems, i.e., the airport may need to step in (even though it is not financially obligated to do so) to preserve the use of the facility and associated airport capacity Can expose the airport to political, legal, operational, and financial risk if the transaction is not consummated or if the private entity incurs financial difficulties Involves loss of key revenue streams under parking and cargo privatization Management Contracts Accesses private sector expertise for specialized functions and commercial development Provides potential to cut costs and optimize efficiency and thereby reduce costs to tenants Provides opportunity for airport to be managed and operated as a business Streamlines day-to-day operational decision making Brings increased emphasis on revenue enhancement, commercial, and economic development Provides potential for new revenue/economic development initiatives Can streamline and improve certain processes (e.g., renegotiating nonairline contracts) Furnishes potential to impose contractual obligation for contractor to achieve performance targets Provides opportunity for staff to gain m anagement expertise Reduces ongoing m unicipal employee compensation, including post retirement expenses (pension, medical, etc.) Provides greater incentives for management and employees to perform better Provides more commercial and operational freedom for contractor Involves considerable time and effort for the bidding process Could involve buyouts and compensation for existing public workers Could involve organizational disruption (i.e., reassignment or termination of existing employees) Difficult to truly measure efficiencies for the purpose of justifying compensation Can discriminate against government departments competing in managed competition efforts, as regulations generally prevent them from partnering with private firms or guaranteeing performance Requires careful tracking of contract compliance, which can be a time consuming and substantial undertaking for the airport owner Becomes increasingly difficult to attain further improvements and realize the full value of the management fee once initial efficiencies are attained Table 1.5. (Continued).

7 Opportunities and Advantages Disadvantages Long-term Sale or Lease (Full Privatization) Creates potential to promote increase in service, commerce, and economic development Secures a lump sum or ongoing lease payments by selling or leasing airport for budgetary relief (“asset monetization”) or for annual payments to government owner Obtains private capital investment for capacity expansion and m odernization and reduces need for public investment and debt, particularly in light of the potential loss of tax-exempt financing, real reductions in AIP funding, and no increase in the PFC level Provides ability for the private sector to innovate, introduce operational and technological efficiencies, and create new income streams De-politicizes airport operations and insulates airport from broader public policies Provides flexibility to structure and tailor debt to meet infrastructure needs, including potential to tap foreign markets for financing Involves significant time, effort, and out-of-pocket expense to undertake (for both the public and private sector) Involves loss of control by policy makers Requires multiple layers of approvals (federal, state, local, tenants, and employees) Can be constrained by existence of airline use and lease agreements Involves limitations on aeronautical rate increases and requires airline approval to take money out of the aviation system, which can be difficult to obtain and can reduce the value of the transaction Tempts elected officials to cash-out value (“borrow against the future”) without necessarily appreciating and understanding the long-term implications to the airport enterprise Involves higher financing costs (for private capital) than public tax-exempt debt Could involve buyouts and compensation for existing public workers Can involve implementation risk in the event the bidder desires to get out of the transaction Can involve loss of control of the airport by the airport owner, which can be mitigated by including performance standards in the lease Affords limited opportunities because many of the largest U.S. airports already operate like commercial enterprises and few of the smaller ones have strong commercial potential May result in a renegotiation of the contract due to changing market conditions, which are next to impossible to foresee, because of the long-term nature of these leases (50-99 years) Creates long-term responsibility for the airport owner to continue to oversee the performance of the privatized operator, and may also require the airport owner to be ready to operate the airport, if needed, in the event of default or bankruptcy Can expose the airport owner to political, legal, operational, and financial risk if the transaction is not consummated or if the private entity incurs financial difficulties May create greater tort liability risk for a private operator than a public operator in the event of, for example, an act of terrorism or aircraft accident, since the private operator would not likely be entitled to same immunities as a public entity Presents potential for controversy in the event of foreign ownership Gives airport owner less control over customer service standards and airport pricing although performance standards can and should be included in the lease May involve less consideration of local policy issues, environmental impacts, and comm unity interests in favor of shareholder and investor interests May receive less local support if the public owner cannot take money out of the aviation system Provides less access to federal grants Table 1.5. (Continued). 1.6 How to Decide Which Strategy Is Best Each airport owner has different reasons for considering some form of airport privatization. Therefore, it is important to put these goals and objectives into context when consider- ing which solution may be the most appropriate under the circumstances. The process for considering various forms of privatiza- tion involves a multi-step process starting with identifica- tion of the owner’s goals and objectives, familiarization with the specific strategies available, comparison of those goals to

8those of other stakeholders, identification of ways to mitigate stakeholder risks, review of the transaction’s complexity and risk, and valuation of the transaction (Figure 1.4). The key to achieving the highest probability of success is to be both well- informed and rigorous about the evaluation process, while accounting for the diversity of stakeholder views. Chapter 8 provides a step-by-step process for consider- ing and evaluating different privatization strategies starting with identifying the specific goals and/or the problems to be addressed to allow for an initial screening of the alternatives that are best suited to the situation. As illustrated in Table 1.6, some techniques do not fit certain goals, in part due to the strictures of federal law and policy. An important consideration in evaluating potential privatiza- tion models is the level of complexity and risk to implement the action. This is particularly important in the public sector where officials tend to be risk averse. On a scale ranging from the least complex and risky to most complex and risky, the privatization models conceptually can be ranked as shown in Figure 1.5. As illustrated by the matrix, the further an airport progresses along the privatization continuum, the more complicated, risky, and expensive the effort becomes, and while the stakes get higher, so do the potential rewards. The logic behind these ratings is described in detail in the chapter for each model. 1.7 What Makes the U.S. Airport Model Different? There already is a wide range of strategies employed to enlist the support of the private sector in the management and operation of U.S. airports. Nevertheless, it is often men- tioned that full privatization (i.e., full control and/or opera- Specific Strategies Stakeholders Views Goals and Objectives Risks and Mitigants Valuation Drivers Complexity and Risk Figure 1.4. Decision tree filter. Partial Privatization Full Privatization1 Goals and Objectives Service Contracts Management Contracts Developer Financing/ Operation Inside APPP Outside APPP Maintain community control of airport operation and development decisions X X Secure operating efficiencies X X X X X Introduce innovative revenue enhancements X X X X X Eliminate airport subsidies X X X X Reduce airline costs X Convert underutilized facility into economic catalyst X X X X De-politicize airport decisions X X X X Address identified deficiencies in airport management X X X Advance ideological interest in private sector participation X X X X Address improper conduct, e.g., corruption X X X Access private capital X X X Accelerate project delivery X X X Reduce construction costs X X X Transfer construction risk X X X Minimize organizational disruption X Use sale or lease proceeds for non-airport purposes X* Repay airport debt X X * Only with 65% airline approval at primary airports. 1 “Full privatization” includes outright sale and long-term lease. For example, the proposed long-term lease of Chicago’s Midway would fit in this category. Greenfield private development is not considered privatization. Table 1.6. Owner’s goals decision tree matrix.

9 tion of an entire airport by a private entity) has become a worldwide trend while only one airport in the U.S. was fully privatized—Stewart in 1999—which has since reverted to public operation. While there has been extensive use of partial privatization at U.S. airports, there has been little appetite for the long- term lease or sale of U.S. airports primarily due to unique factors as summarized below, only some of which have been addressed in the APPP. • Control – The historic pattern of public ownership of airports – Desire of the airport owner (government) to retain control • Financial Structure – The availability of federal planning and development grants and in some cases state grants and loans – The ability to impose and require airlines to collect pas- senger facility charges (PFCs), which provide a capital funding source outside of a contractual airline use and lease agreement or rate schedule imposed by ordinance – Ready access to low-cost, tax-exempt financing through the U.S. bond market and in some states infrastructure bank loans with low-cost borrowing – The exemption from property taxes for municipal owners • Regulatory – The strict requirements of the grant assurances, accepted as consideration for federal grants – The obligation to use proceeds from the sale or lease of airport property only for airport purposes – The prospect that public entities would be required to repay prior grants upon the sale or lease of an airport to a private operator • Contractual Constraints – The influence of airlines, particularly those that carry the majority of an airport’s traffic, as a result of provi- sions in use and lease agreements providing a signifi- cant role in major capital decisions – Collective bargaining agreements and public sector unions 1.8 Guidebook Organization The guidebook begins with a discussion of the generic privatization models and the context for applying them in the United States (Chapter 2). It then describes in more detail the specific strategies, legal and regulatory conditions, and the objectives, advantages, disadvantages, and risks associated with each strategy in order from the least to most level of pri- vate sector involvement (Chapter 3 through Chapter 7). These chapters provide examples of the various ways U.S. airport owners have used private sector companies in the operation, management, financing, and development of their airports. These examples also illustrate the depth and extensive long- term experience with private operation of airport functions and activities in this country. Chapter 8 helps the reader understand the process and con- siderations for identifying and evaluating realistic options for private sector involvement. Chapter 9 provides a summary of the U.S. case studies, which can be found in their entirety in Appendix H. Source: LeighFisher. HighLow Degree of Complexity Low High D eg re e of R is k Management Contracts Service Contracts Developer Financing/ Operation Full Privatization Figure 1.5. Conceptually assessing complexity and risk.

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TRB’s Airport Cooperative Research Program (ACRP) Report 66: Considering and Evaluating Airport Privatization addresses the potential advantages and disadvantages of implementing various approaches to airport privatization.

The report covers a range of potential privatization options and highlights case studies conducted at a variety of airports both within the United States and internationally.

Appendices C through H, to ACRP Report 66 are available on a CD-ROM that is included with the print version of the publications.

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