Airports are Going Private

When the Wright Brothers invested in what is now the oldest commercial airport in America--at College Park, Maryland--they probably didn't expect the airport business to become a government enterprise. They envisioned a future of private entrepreneurs and private companies putting millions of Americans in the air on largely private funds.

Fortunately, U. S. aircraft manufacture and airlines themselves have always been private and not by coincidence, the envy of the world as well. Airports, on the other hand, became the province of the public sector. Most of them are today owned by one unit of government or another and operated by public employees.

That may change radically in coming years as a trend that started abroad catches root in this country: airport privatization. It promises a healthy dose of what makes most other businesses innovative, efficient and responsive to consumers--competition, the freedom to act in an entrepreneurial fashion and the ability to raise needed capital without the hindrance of political considerations. Governments are coming around to the notion that private, for-profit firms have the incentive and the expertise to build and operate airports better than almost any public bureaucracy.

It all began in 1987, when the Thatcher government in Great Britain sold seven major commercial airports through a public sale of stock--Stansted, Glasgow, Edinburgh, Prestwick, Aberdeen, Gatwick and one of the busiest in the world, London's Heathrow. An astonishing 2.2 million citizens bought 1.4 billion shares in the private British Airports Authority. The Belfast International Airport in Northern Ireland goes on the auction block next.

The British privatization has produced a more economical use of the labor force and scarce capital resources, much-needed capital investment, and a stream of tax revenues to the central government in place of subsidy payments. The British flying public has been greeted with a new aggressive and entrepreneurial attitude aimed at pleasing customers.

Airports are going private in a growing number of countries since the British success. They include Auckland International in New Zealand, part of the Vienna airport in Austria, and the major airports of Malaysia and Singapore. Similar moves are planned for facilities in Africa and Latin America.

Operation and management of four of Canada's largest airports--Vancouver, Edmonton, Montreal and Calgary--have been privatized. The first privately developed, built and operated passenger terminal in North America is the $520 million Terminal 3 at Toronto's

Lester B. Pearson International Airport, through which more than 12 million people will pass this year. The attractive, customer-friendly Toronto terminal features 110,000 square feet of retail space and some of the finest shops in the world, including Harrod's of London. "Something more than a stale muffin and a coffee and a wall to lean against," said a spokesman for the facility to Civil Engineering magazine.

Bureaucratic inertia and cumbersome regulations still impede airport privatization in the U.S., but the idea is gaining ground in many quarters. The Reason Foundation in California has estimated that if the 50 largest airports in the U.S. were sold to private interests, sales revenues would exceed $23 billion. Governments would reap an annual tax bonanza: $400 million in local property tax revenues and $600 million in federal tax revenues. The Reason Foundation has provided much of the intellectual and economic case for the sale or lease of Los Angeles International (LAX), either of which may happen in the very near future.

A few years ago, the federal government transferred Washington National and Dulles International airports to a local unit of government. Freed of federal red tape, the local authority has contracted out much of the day-to-day operations; about 85 percent of the 22,000 employees at the two airports now work for private companies.

A 1992 executive order from President Bush makes it much easier for state and local governments to privatize infrastructure facilities like airports. But if there's a clear trend in U.S. airport privatization, it is not yet toward outright sales, but rather the contracting out of airport operation (with government retaining ownership). That option has been partially implemented or is under consideration by airport officials in Baltimore, Dallas, Boston, Indianapolis, Palm Beach, New York, and Peoria, to name only a few places.

A 1988 Mackinac Center study of Detroit Metro Airport--the first comprehensive analysis of the feasibility of privatizing any major U.S. airport--conservatively estimated that the outright sale of Metro could generate $10 million in local property taxes to the city of Romulus and a one-time windfall of $350 million to Wayne County.

Small and medium-sized airports, being less complex than large facilities, have even greater privatization potential. Of the 236 licensed and open-to-the-public airports in Michigan, for example, 111 are privately-owned and operated. Many of the other 125 publicly-owned airports contract out their operation and management to private aviation service firms. Barstow in Midland County, Harry Browne in Saginaw County, and the Owosso Community Airport in Shiawassee County are three of several Michigan airports where some form of privatization has been a topic of debate recently.

Five years ago, an offical of Midland-Bay City-Saginaw's Tri-City International scoffed at the thought of airport privatization with this remark: "If it's such a great idea, how come it hasn't been done before?" Well, the track record here and abroad is now such that responsible public officials can no longer dismiss the idea.

Indeed, current trends suggest that airport privatization is one idea whose time has finally come.