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REGENERATION, RUNWAY AND ALL THAT JAZZ
By Dr. Christopher J. Smith, Managing
Director, SH&E Limited
Introduction
The economic importance of airports as a magnet for growth, development
and inward investment has long been recognised. While this article focuses
on the issues that are generated by the funding problem, other aspects
of airport development (environmental intrusion, surface access, urbanisation
pressure) are no less important.
The publication during the summer of the Government’s consultation
documents on the development of air transport means that airports are
very much ‘in-season’. Many politicians will have to grapple
with conflicting issues over the coming weeks and months, knowing that
their decisions will have significant consequences for their children
and grand-children. This article endeavours to provide a background to
ensure that the funding of developments need not cause sleepless nights!
Recent experience
Over the last decade, the private sector has taken financial stakes in
a number of UK regional airports through various mechanisms. Indeed, last
year some 85% of passengers at UK airports were travelling though facilities
owned/operated partially or wholly by the private sector. This was the
highest percentage of any major country, other than Australia. The position
in the UK has arisen, at least in part, because of the constraints and
pressures on public sector finances.
But, has this private sector involvement been successful? Can the private
sector be entrusted with such vital assets and key pieces of infrastructure?
“Yes” is the answer!
Historic performance
Growth at airports with at least some private sector shareholding has
been above the UK average since their ‘privatisation’.
However, it would be totally wrong to suggest the enhanced growth seen
at the ‘privatised’ airports results solely from their private
sector involvement, since regional airports, including some owned by local
authorities, as a whole have grown at a faster rate than the UK average
over the last decade. The most appropriate conclusion that may be drawn
from the table is that private sector involvement has certainly not held
back growth of the airports.
It is of course important to recognise that the economic contribution
of airports arises far more from the air services whose operation they
enable than from their own direct contributions. Attracting new air services
is now a critical function for airport management, and often private companies
operating a number of airports around the world are able to devote greater
resources to this activity than a smaller, ‘only child’ operation
could justify.
Alignment of interests and controls
Turning to the second potential concern, can the private sector be entrusted
with such a vital role? The interests of public and private sector in
the growth and development of an airport are generally aligned. An airport’s
economic impact is often considered in three distinct categories: Direct
(i.e. clearly associated with the existence of the airport); Indirect
(i.e. employment in service industries supporting the direct employees);
and Induced (i.e. attracted to the region because of the existence of
the airport and air services).
The private sector airport operator in general wishes to maximise traffic
volume in order to generate maximum revenue from airport charges, shopping,
catering, car parking etc., and this is completely compatible with maximising
economic impact. The only area where public and private might have a difference
of opinion is in number of staff directly employed by the airport company,
which the private sector would wish to minimise. However, airports employ
relatively few staff directly, and numbers in some categories (e.g. rescue/fire
staff), are set by legal and safety standards .
If a local authority considered that these shared interests did not offer
sufficient protection, then it would have a number of other tools at its
disposal: maintaining a majority interest; interim agreements on staffing
levels; contractual commitments on developments, to mention but a few.
Additionally, the Planning Process can also provide additional controls,
although of a more negative and constraining nature.
Conclusions
In conclusion, the public sector should have few fears about private sector
involvement in airport ownership, while there is much to be gained from
it. In addition to providing the financial capacity to fund development
and enable an airport to maximise its potential contribution to local
economic development, the private sector may have greater flexibility
in developing air services. Who knows, in the future regional airports
may need to buy slots at capital city airports in Europe in order to maintain
vital links to key commercial centres!
The alternative to expansion, is a rationing of a scarce resource, so
that air travel moves back to being within the reach of only the rich.
1. SH&E is the world’s leading,
specialist air transport consultancy. Contact: csmith@sh-e.co.uk.
2. The more aggressive exploitation by
private operators of retail and catering opportunities may create more
employment in these concessions than may be lost from the airport operator’s
own employment.
Contact:
Stephanie Toomey
Director of Marketing
SH&E, Inc.
Phone: +1 617-225-2800
E-Mail: stoomey@sh-e.com
© 1996-2003, SH&E, Inc., All rights reserved
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