Privatization, Commercialization and Deregulation of Airports

Denver’s geographic location and the growing size of its population and commerce made it an attractive location for airline hubbing operations. There was a growth on the determination of the “ pro New Airport”.

The National Plan of Integrated Airport Systems (NPIAS) forever changed the way airports were classified when it was unveiled in 1982 (Wells, 2011). The aviation industry had grown significantly since deregulation went into effect, and a new system needed to be put in place that would distinguish airports with incredible growth and expansion from those that served niche markets or flight training (Wells). Under the NPIAS, airports were broken down into three major categories: commercial services airports, reliever airports, and general aviation airports (Wells). The following paragraphs describe the three categories of airports that were created by the NPIAS, and conclude with an airport that fits into that particular category today.

As the research data was collected, especially with the case study comparative analysis’ between the Texas airports, the statistical occurrences began to detail flight/economic improvements, not only at Love Field, but also at Austin, DFW, Houston, and San Antonio. As seen by the data below all the major airports saw an increase in airline ridership, flights and overall operations.

Hard to compete against the large airlines not only for customers but space at the airports for their airplanes.

Virtually all commercial airports in the United States are owned by state and local governments. But around the world, airports are becoming viewed more as business enterprises, and less as monopoly public services. Governments in both developed and developing countries are turning to the private sector for airport management and development. There are two different types of privatizations; partial and full. Partial privatization refers to strategies where partial control and at least a portion of ownership remains with the public owner. Full privatization refers to strategies where the complete control and/or operation of an entire airport are vested with a private entity through a long-term lease or sale. The United States has not privatizes because the airports still has repayment of grants, airport revenues can only be used for airport purpose and airlines have too much say because of long term lease contracts. There is a Airport Privatization Program that started in 1997 to privatize airports. They started with 5 airports and expanded to 10 airports in 2010. The experiment is ongoing so it is hard to tell if it work yet. So, everything runs smoothly on the inside of the airport? Security is well oiled

Having a strong and efficient airport is essential to the Pittsburgh regional economy. There are now more options both for business and leisure travelers in the past two years. There has been an expansion of new carriers such as Allegiant, Frontier, OneJet, Southern, and Condor. These airlines are recognized for their strong regional economic growth and a demand for more nonstop service. The continuous growth in both air service development and real estate development around the airport is very well known. Costs to the airlines have continued to decrease and the airport’s finances have stabilized. The outstanding momentum seen at Pittsburgh International Airport is building, from the increase in air services to the decreasing debt and having a strong foundation for finances. The airport is matching the region’s economic success, and also the airport’s vision of being a global leader in

American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.

“Strategic alliances thus combine the advantages of flexible, long-term collaboration at a reasonable and foreseeable risk level while promising long-term benefits for both partners” (Albers, Koch, & Ruff, 2005). Agreements made between airline companies and airports have multiple names; strategic alliances, agreements, airport collaboration contracts. Airports and airlines in other countries outside the United States have different agreements on financial responsibilities for the airport terminals. In the United States, airports are considered landlords and help with the coordination of services (Albers, Koch, & Ruff, 2005). The United States has the “airlines build their own terminals and facilities” (Albers, Koch, & Ruff,

Thee aviation liberalization policy has also opened up investment chance in the hardship of airports.

Another emerging trend in the past five years has involved the progress made on open skies agreements between the United States and other countries. Open skies agreements serve to liberalize Orlando International Airport transport markets between the two signing countries or parties in the agreement. These agreements remove government restrictions, such as limits to the number of flights any one airline is allowed to operate per week between countries. The removal of these limitations has opened some routes up to increased competition, by allowing Orlando International Airport to fly more frequently and making these routes more accessible. Orlando International Airport could not previously justify the capital expense of operating on routes with limited flights are now able to profit on routes with high demand.

A drop in fares has been the best result of the Airline Deregulation Act of 1978. It has been the impetus for the increase in the number of flights, which in turn has spurred a drive for greater safety in airlines. But with the current airline market, this development has given us one negative. Since ticket prices have dropped to new lows, the realities of an industry which operates on such economies of scale dictates that only a few competitors have the capacity to operate within the market. This is not the desired effect of either political side on this issue, but it is an economic necessity with the environment that has been created, very similar to that of public utilities and phone companies.

First, inherent costs have strategic critical issues that significantly impact costs, but are often outside the near and medium-term control of management. Moreover, the Airports nature, design and industry decide the cost e.g. (location). An airport business

After deregulation, airlines have developed a hub and spoke structure as spatial and the commercial strategies for organizing airline

The private sector increasingly has come to view airports as an attractive investment; airports serve a dynamic growth industry--commercial aviation--and represent essential infrastructure with a near monopoly. Qualified private airport operating companies have materialized and others will evolve, while successful public airport operators are seeking to expand to provide airport management services--generally as part of broader investor groups. As a result, substantial numbers of airports will come to be operated by a worldwide network of airport operators. These worldwide operators will engage in healthy competition with each other to be efficient and offer superior services, and thus support the objectives of the investor groups in which they participate. The city of Austin expectations by privatizing were: „h Accountability. Private contractors are paid for results. This gives them an unwavering focus on performance that can rarely be sustained in a public agency. Moreover, private contractors operate under the very real possibility that if their performance is found lacking, the contract may end. This accountability is transferred directly to employees who must deliver top-notch performance to preserve their position in a private organization. „h Performance-based Compensation. Just as private contractors are

The next step is to get all the segments in the industry to work together with governments and other organizations. ACI also wants governments to work with airports so they can influence legislations and policies. They also want to educate the general public on the importance of airports and the economic impact that it has on the economy. In addition, ACI wants airports to increase cooperation and assistance among airports. Also, educate members in the industry, advice and assist management teams and operations.