IATA boss says airport privatisation a failure

International Air Transport Association chief executive and director general Alexandre de Juniac. (IATA)
International Air Transport Association chief executive and director general Alexandre de Juniac. (IATA)

International Air Transport Association (IATA) chief executive and director general Alexandre de Juniac says the privatisation of airports around the world by governments often seeking a short-term boost to the budget has proven to be a failure.

Speaking to the Association of Asia Pacific Airlines (AAPA) assembly of presidents in Taipei, de Juniac said airports “perform better in public hands”.

“That is the conclusion of three decades of largely disappointing experiences with airport privatisation,” he said in his speech on October 25.

“The primary focus of airports should be to support local and national prosperity as an economic catalyst,” de Juniac stated.

“But in private hands, shareholder returns take top priority. And we struggle with costs at privatized airports as far flung as Paris, Sydney and Santiago.”

His comments come as the aviation industry tries to cope with the growing demand for air travel, with the number of passengers in the Asia Pacific alone expected to more than double to about 2.1 billion annually over the next two decades.

And infrastructure looms as the major bottleneck, with many airports in the region at or above design capacity, while air traffic management is constrained by a lack of inter-government cooperation regarding airspace or slot restrictions at airport.

IATA has conducted an extensive study on airports, the details of which de Juniac said would be released soon.

While de Juniac said privatisation was “not by itself negative”, the regulation of those airports – both the regulatory framework or the regulatory body – lacked efficiency.

“What we have seen is that regulating privatised airports is difficult, to be polite, and has been a failure, to be impolite,” de Juniac told reporters on the sidelines of the AAPA conference after his speech.

“We haven’t found any government or any country that has been able to regulate efficiently privatised airports. So we have seen in countries in which airports are privatised an increase in fares in airport charges, in whatever we pay to land and to park our aircraft. At the same time the airfares have decreased. The gap is significant.”

de Juniac noted those airports that regularly topped the list of the world’s best airports, citing Amsterdam, Dubai, Hong Kong, Seoul Inchon and Singapore Changi as examples, were all in government hands.

“Among the top five or top six airport on the planet, they are in public hands.”

Further, he said the move to sell off airports was often not triggered by aviation interests but pressures on government budgets.

“It is because the state needs money,” he said.

“When they are privatised, the public entities, whether it is local governments or states, they wash their hands about this infrastructure which is absolutely monstrous because when you talk about hubs it is national interest infrastructure.”

An aerial image of Sydney Airport. (Sydney Airport)
Sydney Airport is a publicly listed company on the Australian Securities Exchange. (Sydney Airport)

In Australia, the major capital airports are either publicly-listed companies or held by large investment or superannuation funds.

And the industry group representing the nation’s airport, the Australian Airports Association (AAA), has previously described the privatisation of airports as “successful and transformative”, noting the “billions of dollars of private investment that would have otherwise come from the pockets of taxpayers under a government ownership model”.

AAA chief executive Caroline Wilkie, writing in the August edition of Australian Aviation, said the privatisation of the nation’s airports that began with Brisbane, Melbourne and Perth two decades ago had “arguably been one of the most successful and transformative infrastructure privatisation processes this country has ever seen”.

“It’s also worth remembering that our major airports remain over 85 per cent Australian-owned by Australian superannuation funds, so the investment in our critical infrastructure and the benefits it delivers helps drive our economy,” Wilkie said.

“While we observe the challenges currently facing several other infrastructure sectors as they begin the transition to private ownership, perhaps there are some valuable lessons that can be learned from our major airports.”

The Australian Competition and Consumer Commission (ACCC) annual Airport Monitoring Report for 2015/16, published in March, said Melbourne and Sydney airports had improved their quality of service rating to “good”, from “satisfactory” in the prior year.

Brisbane and Perth airports maintained their “good” rating in 2015/16, and were rated “equal highest” of the four monitored airports.

The report found airports were “collecting substantially more aeronautical revenue per passenger than a decade ago”, which have been used to cover both increasing costs per passenger and to grow profit margins.

“The ACCC estimates that over the past decade, these airports have collected $1.57 billion more in revenue from airlines than they would otherwise have collected if average prices were held constant in real terms,” ACCC chairman Rod Sims said.

“Despite these much higher revenues per passenger, ratings of service quality are not materially different from those seen a decade ago.”

Comments

  1. GBRGB says

    It may have been beneficial for large airports in capital cities or larger tourism hubs but for the rest of the sector privatisation has failed miserably in Australia as well, here in Townsville we have a poorly run neglected property drained of cash with less passengers than it had 5 or 6 years ago, a parent company unwilling to fund much needed upgrades, I would suggest many other airports in regional areas are the same.

  2. Will says

    Well personally, in Adelaide i think privatisation has worked wonders for our airport. in under 20 years passenger numbers have more than doubled and weve almost reached 1,000,000 international pax, a far cry from 150,000 international pax back in 98 the last year AAL was government owned. We also have a gleaming new state of the art and award winning terminal to show for it too. It doesn’t even compare to the shaggy old temporary ‘shack’ of a terminal we had while Adelaide airport was government owned.

  3. Geoff says

    Governments are supposed to listen and represent all the people. Instead some privatise parti cular publicly owned facilities and look after certain people who benefit. No surprises!

    How does this fit with their Public contact?

  4. Ian Morris says

    Not a surprise there! Privatisation rarely works well other than for boosting short term government revenues. Perth for example now has horrendously expensive parking, most of the buffer zone around the airport has been built on so causing long term issues with respect of noise and traffic and what we have ended up with with regards a disconnected mess is hardly the stuff of “arguably been one of the most successful and transformative infrastructure privatisation processes this country has ever seen”

  5. says

    An important well-balanced article. The ‘success’ of privatised Australian airports is not a relevant example because Australian superannuation is – effectively – a form of taxation, and the superannuation companies are – effectively – government departments. The failure of Australian ‘regional’ airports is purely due to lack of demand (population with disposable income).

  6. David says

    AAA self congratulates over saving the taxpayer the cost of having the airports… Given that pretty much all airline passengers are directly or indirectly taxpayers (themselves or through corporates who claim the travel as tax deduction effectively adding to the tax paid by others) it seems that the community still pays one way or the other.