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Privatization has proven successful in developing airport infrastructure to cope with traffic growth

September 20, 2018 Airport No Comments Email Email

At the 2018 World Aviation Forum, in Fortaleza, Brazil, Airports Council International (ACI) World, today called on governments and regulators to facilitate appropriate private investment in airports since it has proven to help deliver strong traffic growth, significant increase in capital expenditure, and improvement in service quality in airports around the world.

During a panel discussion on investing for growth and strategies for Aviation development, ACI World Director General Angela Gittens, stated that investment in airport infrastructure is critical to the global economy and global connectivity, and if governments are unable to make the required levels of investment, other sources must be tapped to accommodate traffic growth.

The panel concluded with Gittens’ call to consider privatization as a valid option to address shortcoming in existing airport infrastructure and to invest in future capacity and service quality improvement as traffic is expected to be above 22 billion passengers by 2040, growing at an overall rate of 4.5% per year on average.

ACI has evidence showing that private investment, when the legal framework is clear, and investor-operators are able to exercise business innovations to try to make returns on the risks they take, has been successfully used to contribute to community and national economic vitality and enhance the passenger experience.

“Given the significant infrastructure challenges, to meet growing demand, the injection of private investment has been a successful option for airports in Australia, Mexico, Brazil, Republic of Congo, Italy and Malaysia,” Gittens said. “ACI’s Policy Brief on Creating fertile grounds for private investments in airports provides a multitude of cases demonstrating this.

“With global passenger numbers forecast to double by 2030, stakeholders in the aviation industry are in broad agreement that investment in airport infrastructure is critical to the global economy and global connectivity especially in achieving the United Nations’ Sustainable Development Goals (SDGs). A range of objectives may lead to consider privatization and this policy option is becoming more common. Of the top 100 airports for passenger traffic, the number with private sector participation grew to 51 in 2017, five more than in 2016.

“Of the top 500 airports in 2017, 39% had private sector participation. Single airports, airport systems and airport networks provide significant value creation for airlines, passengers and the communities they serve. Economies of scope and scale enable airport networks to generate significant efficiencies in terms of costs and charges to airlines, while providing customers with a high quality of service.”

ACI is calling governments and policymakers to take urgent action and to adopt the following approach to build favourable investment climate to support the development of aviation infrastructure and communities:

    1. Continue supporting, if applicable, a model by which airport network operators cross-subsidize smaller airports to benefit airlines, passengers, and the communities
    2. Allow airport networks operators to determine the most appropriate charging system for recovering their costs
    3. Generate returns for shareholders and ensure sustainable operation of the smaller airports in the networks
    4. Ensure a clear and consistent regulatory framework exists prior to privatization
    5. Include incentives for investors and foster entrepreneurship and value creation
    6. Match the concession’s lifespan to the privatization model using the appropriate contract length and consider a multi-stage bidding process

“ACI will continue its collaborative efforts with policymakers and industry worldwide to implement the actions needed to improve efficiency, address talent shortage, increase capacity and enhance airport service quality,” said Angela Gittens.

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