Privatization Of Airports

This essay has a total of 2925 words and 15 pages.

Privatization of Airports



For 51 years Bergstrom Air Force Base was home to fighter pilots, bombers, troop carriers and reconnaissance jets. It was the first port of call for President Lyndon B. Johnson on his trips home to LBJ Country aboard Air Force One, it was where Chuck Yeager, the first pilot to break the sound barrier, once brought a disabled jet to rest in an emergency landing. In September 1993, in the path of military cutbacks Bergstrom Air Force Base was closed. But the timing was fortuitous, because the closure came as the city of Austin, Texas was considering where to build a new airport.

In 1993, the expected economic loss to Austin from the Bergstrom closure was estimated at $406 million a year and a loss of some 1000 jobs. But with the possibility of utilizing the prior Bergstrom Air Force Base as an airport the Austin economy was expected to have an opportunity to rebound and even improve these results from the base closure by privatizing the airport.

The trend worldwide toward airport privatization presents an exciting and dynamic opportunity for the flying public, governments, operators and investors. The overall success of privatization of airports has been seen by the sale of long-term leases for three of the largest airports in Australia for $2.6 billion. Following this success, the Government of Australia announced their plans to privatize fifteen more airports.

Several Latin American airports already are in private hands. Major airports in Argentina, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela are already concessioned or scheduled for privatization over the next two years. Smaller airports in Central America and the Caribbean also are to be privatized.

In Europe, a significant number airports have been privatized and opportunities are imminent in Germany, Portugal and elsewhere. Governments in Southeast Asia, Africa, and the world over also are developing airport privatization plans.

Why has this marked trend emerged and why did the city of Austin choose to act in this capacity? Governments in many cases do not have the financial capacity to invest in airport expansion as well as meet other needs of their citizens. They are recognizing that on one hand there are limits to their own knowledge of, and expertise, in managing airports; and, on the other, that such expertise can be provided by others with the effect of reducing costs, increasing revenues and improving services. An important objective in many instances is to increase competitiveness and enhance ability to attract economic development by improving airport facilities and obtaining additional air service.

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 paid based on results, they can base employee compensation on performance. Contractors can pay bonuses for exceptional performance and give merit increases alone rather than longevity-based pay increments. This elicits greater productivity and effectiveness from staff.
h Management Expertise. Contractors develop expertise to compete effectively. They hire well-known experts and develop management structures geared toward continuous improvements in performance.
h Flexibility. Private contractors have the flexibility to respond quickly to changing program requirements or evolving needs of organizations. They can acquire new technology, obtain new equipment, reorganize offices, and/or adjust staffing configurations without the encumbrances of slow-moving public civil service or procurement systems. Most importantly, if they can increase their revenue by investing in more staff and other resources, they have the flexibility to do so without the artificial constraints of limits found within the government bureaucracies.
h Technology. Because of purchasing power and a conduit to leading edge technology, private companies can obtain and adapt technology to improve productivity and track performance in ways that the public sector is typically not able to match. Governments rarely act quickly enough to develop or use leading edge technology.
h Customer Service. Private contractors tend to place a strong emphasis on customer service because, for competitive reasons, they must be acutely sensitive to their reputations in the communities that they serve. They also bring a level of expertise in improving customer service that may not be as well developed in the public sector.
h Cost-effectiveness. Numerous studies have documented the cost savings agencies achieve from outsourcing services to private organizations. For full-service private airports, an initial investment may be required to transition to privatization, but a private contractor will tend to reduce the costs of operations.
h Responsiveness. Private contractors are directly accountable to the governmental agency that has outsourced to them and, as a result, they tend to be very responsive to that agencys mission and objectives.
What the results were for the city of Austin

In their effort to privatize Bergstrom, the city met many challenges and issues such as environmental clean up, what do with existing structures, noise pollution and re-use issues.

The cleanup chore

When Bergstrom closed in 1993, it was among more than 50 military installations being closed or realigned because of defense cutbacks. There was considerable work to do before the Air Force could turn the site over to the city. Foremost among the chores was the cleanup of 481 hazardous waste sites -- everything from landfills of household waste to jet fuel spills. Such sites can make it difficult to reuse military installations for many purposes because of the cleanup required.

The $55 million cleanup was led by the Air Force Base Conversion Agency and included efforts of the city, the Texas Natural Resource Conservation Commission, U.S. Environmental Protection Agency and U.S. Army Corps of Engineers, among others. Airport construction in any area could not be started without (environmental) clearance.

The city's construction schedule was constantly changing which made it difficult for the Air Force to plan its cleanup activities. That, and questions about what degree of cleanup was required, caused some friction between the regional site management for the Air Force Base Conversion Agency and the city of Austin. The mistrust simmered over everything from questions about the schedule to debate about the cleanup. The Air Force believed the cleanup should be done to the level of what might be found at an average industrial site. The city wanted everything cleaned up to the level of a residential site. Communication between all members of the clean-up team just wasn't happening. A series of meetings were set-up at which the cleanup team determined it could work first in certain areas critical to construction, turning over those areas as they were completed. But it was a hill of dirt that finally broke the barriers between the city and the Air Force. At a cleanup team meeting, the Air Force brought forth a plan to truck in tons of soil to cap landfills on a site. The city of Austin needed to raze a hill on the building site for the east runway. The city was going to pay to remove the hill. The Air Force was going to pay to truck in soil. Why not just turn over the hill to the Air Force and save taxpayers the expense? After agreeing on this, cooperation between everyone became easier. For the Air Force, it was one of the better experiences.

In the end, most of the base was cleaned up to the city's liking. In cases where the Air Force met only its standards, the city went in afterward to clean up the final bit. This was done primarily because the city believes it will eventually have to expand the airport. City officials didn't want to have to worry about cleaning

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