IATA slams airport privatisation; evolves roadmap for world govts

Governments have not developed a robust business case and there was insufficient meaningful consultation with industry, says IATA chief economist Brian Pearce

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 and 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, which began on Monday.

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.