Considering and Evaluating Airport Privatization (2012) / Chapter Skim
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Pages 21-27
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21 4.1 Specific Strategies Numerous airports have contracted out the management and operation of parking facilities, concession operations, or entire terminals where the operator manages the facility on behalf of the airport owner for a specified period of time and in return receives a management fee. A number of airport owners in the United States have contracted the day-to-day operation of their entire airport to private operators.
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22 4.2.1 Terminal Management Contracts Some airports have contracted out the management and operation of entire terminals. Atlanta Hartsfield International Airport.
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23 AIRMALL® USA also contributes to a repair and replacement fund to cover certain repair and replacement costs.13 Westfield Concession Management (Westfield) manages the food and beverage programs at Reagan National and Dulles International on behalf of the Metropolitan Washington Airports Authority.
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24 services; and Wyle Laboratories for services in connection with noise abatement. The airport maintains its own police department (Burbank-Glendale-Pasadena Airport Authority Police)
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25 generated a $1 million annual loss, but subsequently turned the enterprise around to generate a $2 million annual profit. As leases expired, American Airports was able to re-set to market rates and escalated them at the CPI.
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26 meets the "qualified management contract" test under Internal Revenue Service (IRS) regulations.
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27 • Provides greater incentives for management and employees to perform better • Provides more commercial and operational freedom for contractor 4.4.3 Disadvantages The main disadvantages provided by management contracts include: • 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 Regarding the Indianapolis management contract, the airlines felt that while there were benefits at the front end of the contract, toward the end of the lease, the airport and airlines were questioning the significant payments to the contractor with diminishing or no additional benefits.
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