Considering and Evaluating Airport Privatization (2012) / Chapter Skim
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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 financially viable as possible, as well as ways to maximize the community's return from their airport assets. Communities have and continue to promote private sector participation in airports in pursuit of these goals.
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2• Full Privatization -- Full privatization refers to strategies 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.
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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.
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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 facilities, 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.
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5 Full Privatization Pursuant to Pilot Program (49 USC § 47134) Full Privatization Outside Pilot Program (FAA Order 5190.6B)
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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)
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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")
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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)
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9 tion of an entire airport by a private entity) has become a worldwide trend while only one airport in the U.S.
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