AIRPORTS IN THE GAME OF PRIVATIZATION! A SUCCESSFUL OR AN UNSTABLE JOURNEY?

It’s been a while since the term ‘privatization’ has played its game and seems like this is something that is not going to end. Believe it or not, privatization has now become a major debatable topic in the whole world whether is privatization of business entities or even airports.

Airport privatization has become a trend in the past thirty years as economies change and the air transport sector matures. Airport management and ownership, once mainly the domain of governments, has evolved into a mix of public and private airport ownership. Airports must now compete with other airports around the world or business, and government may not be the best owner for a globally-competitive enterprise. Airports must have the freedom to compete on the commercial level, and not just provide a service to the travelling public. Airports seek privatization in part to improve their abilities to develop a customer-focused business plan.

INTRODUCTION

The Indian Civil Aviation Sector is in for a major overhaul over the next few years. Major policy changes are taking place because of a shift in the mindset of the government authority from considering air travel as elitist to making it available for common man in the society. 

The airports in India are inadequate for handling the increase in air traffic. However, in order to have a smooth control, the system decided to find loopholes and suggested improvements. The government decided to privatize airports in order to induce efficiency and avoid the burden of investing in the same. This is the time where airports are being seen more as businesses than infrastructure providers.

        There has been a lot of debate over the rationale of privatization of airports. It was argued by the critics that given the importance of airport infrastructure, the game players would overcharge and exploit the public. On the other hand, proponents of privatization argue on the basis of poorly managed public airports. This proved to be a failure of the government in the airport infrastructure which has largely driven privatization. Further, privatization also brings in much needed capital and the efficiency introduced by market forces. However, governments have made sure that they carefully prevent market failure by actively regulating the airports.

“PRIVATIZATION CAN BE A WRONG PATH FOR AIRPORTS” – SAYS IATA!

Currently, 14% of airports globally have some level of privatization, but this could be set to increase, thanks to the incentive of generous private funding and reduced the reliance on the government money. Nevertheless, what opinion does IATA have to give on the same and how far is it agreeable? 

         IATA( The International Air Transport Association), during a general meeting urged governments to take cautious approach when considering airport privatization. IATA members called on governments to prioritize the long-term economic and social benefits delivered by an effective airport ahead of the short-term financial gains provided by a poor thought-out privatization. Also the Director General and CEO of IATA, Alexander de Juniac had said that in between the infrastructure crisis, governments are looking to the private sector to help develop much needed airport business space capacity. But it is wrong to assume that the process of privatization has all the answers. Airlines until now have not yet experienced an airport privatization that has fully lived up to its promised benefits over the long time. 

SUCCESSFUL PRIVATIZATION OF AIRPORTS: REASON TO AGREE!

An increasingly important theme in airport government policy, yet nearly always controversial, is private sector involvement or privatization. It is now over 30 years since the first airport privatization occurred with BAA in the UK in 1987. Since then a significant number of other countries have adopted such policies, albeit that the scope and extent of private participation has varied considerably.

The motivations for airport privatization, as with other industry sectors, are varied and complex and depend on the economic, political and air transport environment of individual countries. However, a study of a large number of privatizations has provided us with a clear insight of the objectives for its necessity. Specific factors like improvements in the efficiency and performance of the airports, provision of investment funds, improving the quality of service and management; lessening ht burden of relying on the government for financial support, etc have showed light on the success of privatization. 

CONCLUSION -A POINT OF VIEW!

After all these years of continuous debate on the privatization of the airports, not one could come to a conclusion. Around the world, there has been various reactions on the same. The debate still goes on whether privatized airports should be run or government airports.

           According to me, privatization of the airports have really made a huge number of improvements in all these years. The process has indeed worked out well for the airports, increased the efficiency and introduced to automation; has made a stable and powerful place in the industry against worthy competition which can lead to expansion of the airports in areas of surrounding important cities; As construction and management of airports is a capital-intensive business, private owners can improve the airports and keep recovering the costs from the customers. With this positive side of the privatization, I feel there is a negative side too about which a strong supporter of the privatization of airports must be aware of.

         To sum it up, the privatization of airports is definitely a very hot topic globally and quite inevitable which has its own benefits and pros and cons. Airport privatization has and always will be a controversial and emotive issue for us to be in support of it.

 Well, this is what I have to say about how airports have been playing in this game of privatization, but there’s no stop in knowing more about it. I would like to know more about the same from my readers, so do enlighten me with your comments or thoughts below.

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Blog by Anusha Sridhara Murthy

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