Sydney: Concerned over an aviation infrastructure crisis, global airlines body IATA Tuesday asked governments to be cautious on airport privatisation, saying it was wrong to assume that the private sector had all the answers.
The 74th annual general meeting of the International Air Transport Association (IATA) unanimously passed a resolution calling on governments to prioritise the long-term economic and social benefits delivered by effective airports ahead of the short-term financial gains provided by a poorly thought-out privatisation.
“We are in an infrastructure crisis. Cash-strapped governments are looking to the private sector to help develop much needed airport capacity. But it is wrong to assume that the private sector has all the answers,” IATA Director General and CEO Alexandre de Juniac said, as the chiefs and CEOs of close to 300 airlines adopted the resolution unanimously by a show of hands.
De Juniac asserted that selling airport assets for a short-term cash injection to the treasury is a mistake.
The IATA chief said, “The airlines have not yet experienced an airport privatisation that has fully lived up to its promised benefits over the long term. Airports are critical infrastructure. It is important that governments take a long-term view focusing on solutions that will deliver the best economic and social benefits.”
Currently, about 14 per cent of airports across the world have some level of privatisation. As they tend to be large hubs, they handle about 40 per cent of global traffic, an IATA document said.
“IATA research shows that private sector airports are more expensive. But we could not see any gains in efficiency or levels of investment. This runs counter to the experience of airline privatisation where enhanced competition resulted in lower pricing to consumers. So we don’t accept that airport privatisation must lead to higher costs. Airports have significant market power. Effective regulation is critical to avoiding its abuse, particularly when run for profit by private sector interests,” he said.
De Juniac also noted that five of the top six passenger ranked airports by Skytrax were government owned. Skytrax is a UK-based consultancy which runs an airline and airport review and ranking site.
The resolution, among other things, recognised that the lack of competition in the airport sector can lead to abuse of market power in setting prices and services. It also expressed concern that the result of introducing privatisation in the monopoly airport sector has not, overall, resulted in the consumer benefits of improved efficiencies and reduced costs that have been realized from privatization in the competitive airline sector.
The IATA, through the resolution, asked the governments to consult with airlines, their representative associations and consumer groups, during any plan to change governance or ownership of airports. It also urged the governments to consider alternative ownership and operating models to privatisation.
In his speech, the IATA chief also said that globally, many of the most successful airports are operated as corporatised entities of governments.
“Governments need to evaluate the pros and cons of different models taking into account interests of all stakeholders, including airlines and customers,” he added.
