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Abu Dhabi, UAETuesday 11 December 2018

Privatisation of airports not a panacea to the industry, Iata officials say

Other forms of ownership are needed to reduce operating costs

Saudi Arabia began a programme to set up companies that manage its airports, the so-called corporatisation process, with a view to sell a stake in these assets once they become profitable Francis R Malasig / EPA
Saudi Arabia began a programme to set up companies that manage its airports, the so-called corporatisation process, with a view to sell a stake in these assets once they become profitable Francis R Malasig / EPA

Privatisation of airports is not the answer to boosting efficiency or raising funds, International Air Transport Association officials said amid concerns about rising airport charges and a push by Middle Eastern governments to sell state assets.

Airports with private ownership are often more expensive for airlines and consumers because there is less competition compared to other industries, Henmant Mistry, director of airports and fuel at IATA, told reporters in Sydney on Sunday. Governments looking to sell a stake in state-owned airports to raise money or reduce operating costs should consider alternative ownership models.

“We could not find evidence that private airports were on average more efficient than government airports, which is unusual, you typically expect government-run to be more inefficient,” Brian Pearce, chief economist at IATA, said during the media briefing.

The Middle East has seen a push towards privatising state-owned assets, including airports, as some governments seek to finance budget deficits when oil prices were low. Saudi Arabia began a programme to set up companies that manage its airports, the so-called corporatisation process, with a view to sell a stake in these assets once they become profitable. Oman is also studying the option to partly privatise its airport management company.

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“Governments should be careful if their main objective is to raise cash because their airport is a key part of international trade and competition to attract tourists so they don’t want to make that asset too expensive and damage the longer-term economic benefits that come from it,” Mr Pearce said.

Saudi Arabia has approached IATA to request its input on the airport privatisation process, according to Nick Careen, senior vice president for Airport, Passenger, Cargo and Security at IATA.

A new report titled Airport Ownership and Regulation, commissioned by IATA and researched by Deloitte, was released on the sidelines of the IATA annual general meeting in Sydney on Sunday.

Governments should consider a range of options for airport ownership models including full government ownership, to forms of corporatisation, hybrid models such as service or management contracts and greater private participation such as equity sales, concessions and full divestiture, the report said.

“Each has its merits and there is no one-size-fits-all solution,” according to the report. “A key element of that is ensuring that the interests and input of all stakeholders, including airlines and customers, are thoroughly evaluated before decisions are made.”