Air Transport World

Public monopolies, private profits.(PRIVATIZATION)

TWELVE MONTHS AGO, AEROPORTS de Paris initiated its oft-delayed privatization process with the sale of 32.8% of the company. In addition to raising [euro]1.12 billion ($1.44 billion) for the French airports operator and the government, the IPO raised the ire of otherwise reserved Air France KLM Chairman and CEO Jean-Cyril Spinetta. In a rare series of public outbursts, he openly disapproved of the privatization that led to a new Economic Regulation Agreement for the 2006-10 period permitting a 5% hike in airport charges at Paris Charles de Gaulle in the first year followed by increases of 4.25% annually over the next four years.

Spinetta argued that ADP was abusing its "de facto monopoly" position to raise its tariffs at thrice the rate of inflation, while ADP countered that it needed the additional revenue to finance its [euro]2.5 billion five-year investment program.

The partial sale (the French state still holds a 67.2% stake) had yet another effect: It poured new fuel into the smoldering debate over public versus private ownership of airports. The issue is definitely topical in Europe, where last year some other high-profile privatization dossiers surfaced. There was the [pounds sterling]10 billion takeover of BAA by a consortium led by Spanish infrastructure company Grupo Ferrovial as well as the pending IPO of Schiphol Group. The latter deal ultimately was shelved After the City of Amsterdam, which owns 21.8% of the airport company, used its veto right to block the transaction.

The irony is that Schiphol Group, while struggling to get itself privatized, is active on the international privatization scene, with stakes in Brisbane Airport and Terminal 4 at New York JFK (see article, p. 38). It is not alone. Plenty of state-owned airports participate in the privatization process of counterparts, abroad and at home. For instance, Changi Airports International, a wholly owned subsidiary of the Singapore CAA and owner-operator of Singapore Changi, acquired a 7.1% stake in Auckland International in 1999 and holds a 50% stake in Alterra Partners, which owns equity in Costa Rica, Curacao, Lima and London Luton airports.

"Three to four years ago, IATA along with everybody else believed that the privatization of airports was a good thing because we would see them being managed on a commercial and a business basis rather than under state ownership. But what we have seen is that the ugly state-owned airports turned into even uglier privately owned airports," says IATA Director-Industry Charges, Fuel and Taxation Jeff Poole.

"Airlines tend to get hit twice in an airport privatization," he adds. "The prime reason most governments privatize airports is not anything philosophical or esoteric, it is just generating revenue, and given that the purpose is to raise revenue, everyone tries to fatten the turkey beforehand. …

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