IATA criticises airport privatisation experience; evolves roadmap for governments

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Virtually expressing exasperation over the experience of airport privatisation, global airlines’ body IATA has come out with detailed policy measures for world governments to take up so that public money is not wasted.

Announcing the conclusion of a major study to quantify the performance of airports before and after privatisation, IATA said there was evidence of how privatised airports are more expensive than public, that efficiency of privatised airports is not much better than public airports but, unsurprisingly, profits for privatised airports are much higher.

Clearly, the generally accepted perceptions of introducing privatisation have not held true in the airport sector. Airport charges are higher for privatised airports. This is not what we should accept from privatisation in any sector, Brian Pearce, chief economist of the International Air Transport Association (IATA), said on the sidelines of the World Airport Summit.

He said, our customers (or governments) would not accept it if airline fares increased during privatisation in our sector, and added that operating efficiencies were not much better for privatised airports.

Quoting the findings of the study which examined 90 airports across the world, Pearce said airport privatisation has inevitably failed delivering on expectations because of a range of shortcomings in the process.

Asserting that five out of six best airports in the world were state-owned, he said our goal is to explain to aviation stakeholders why privatisation in the monopoly airport sector is not working for the best interests of long-term social-economic benefits.

Governments have focused on short-term financial gains…alternatives have not been considered. Governments have not developed a robust business case and there was insufficient meaningful consultation with industry, the IATA chief economist said.

There was also lack of transparency in the transaction process and often the process is driven by unsolicited proposals, interested private parties or financiers, he said, adding there were also ?poor regulatory safeguards.

There is a lack of bidder selection criteria and often the highest bidder is simply selected; and/or there are vague or provider-biased concession contract terms,” he added.

However, Pearce and Director of Global Airport Development and Fuel at IATA Hemant Mistry maintained that the body was not opposed to privatisation of airports.

Pearce and Mistry said the airlines’ body and consultancy firm Deloitte have published guidance materials for governments considering public-private partnerships (PPP) and other forms of privatisation programs for airport infrastructure.

“Airports provide critical infrastructure. It is important that governments considering privatisation or PPP take a long-term view and focus on solutions that will maximise the economic and social benefits of connectivity.

“The aim of Airport Ownership and Regulation is to help governments make better-informed decisions using best practices gleaned from decades of experience with the good, the bad and the ugly of airport privatisations,” said Alexandre de Juniac, IATA’s Director General and CEO.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow