http://www.economist.com/node/18744513/print
Private investors can make airports bigger, but not big enough
WITH their crowds, delays and “retail opportunities”, airports
WITH their crowds, delays and“retail opportunities”, airportsimpart feelings that range fromirritation to despair. The experienceis likely to get worse. Over the next20 years the number of jets circlingthe planet is set to double, butinvestment in airports probablywon’t. In Europe twice as manypassengers are expected tosqueeze through 41% morecapacity.One reason why airports are grimis that many are state-owned. Ofthe world’s 30 busiest ones, 19 are state-owned and most of the rest are public-privatepartnerships. In the past they were “administered rather than managed” to serve state-ownedairlines, says Andreas Schimm of Airports Council International (ACI), an umbrella body.Governments now try to run airports on commercial lines, but few do it well. Privatisation couldhelp.Incheon and Cheongju airports in South Korea are likely to seek private investors soon. So areMunich, Moscow’s two smaller airports, France’s regional airports and a host of others. Even inAmerica, where complicated federal rules discourage either selling or buying airports, a schemeto privatise Chicago Midway and four other airports is picking up speed again. In Brazil, however,an effort to woo private cash to spruce up shabby airports before the football World Cup isstalling.An airport ought to be a sound investment. BAA, which runs Britain’s biggest airports, has coinedit. Eyebrows were raised when Macquarie, an Australian bank, bought Sydney airport in 2002.But it quickly boosted revenues and profits. The “release value” of taking public assets privatecan be enormous, says Peter Morris of Ascend, a consultancy.Investors could now be more wary, however. Empty public coffers might encourage governmentsto demand too high a price. The liberalisation of air travel has increased competition between bighubs, especially in Europe and the Gulf. And the soaring growth of low-cost airlines has added tothe pressure. Budget carriers are far more flexible and ruthless than their full-fare competitors. If0Airport privatisation: Runways required | The Economist Page 1 of 2http://www.economist.com/node/18744513/print 04-Jul-11About The Economist online About The Economist Media directory Staff books Career opportunities Contact us Subscribe [+] Site feedbackCopyright © The Economist Newspaper Limited 2011. All rights reserved. Advertising info Legal disclaimer Accessibility Privacy policy Terms of use Helpfrom the print edition | Businessbusiness sags or landing fees rise, they will drop an airport as surely as a baggage-handler willdrop a bag marked “fragile”.Privatisation can improve efficiency and service quality. But passengers may face other torments.Airports earn just 18% of their revenues from airlines, according to ACI. The rest comes frompassenger fees, parking charges, rent from retailers and so on. Rather than squeezing airlines,which can fly away, it is more tempting to go after passengers, who are hemmed in by metaldetectors and armed police.Airlines grouch that landing fees always rise at privatised airports. Giovanni Bisignani, the boss ofIATA, a group that represents airlines, argues that the best airports are those with goodmanagers and tough regulators, and that ownership matters less. But regulations will surely haveto weaken to attract private money.By some estimates $1 trillion of new investment will be needed over the next two decades tomatch airport capacity to flight plans. Yet there are barely a dozen airport groups that might betempted to bid for the terminals and runways on the block. They are unlikely to raise enoughcash to keep pace with the rising volume of passengers. The queues will only grow longer.