Flight Plan

Removing barriers to airport privatization

While nearly everyone applauds the lower fares and increased convenience that have resulted from airline deregulation, all U.S. airports remain government-owned. But change is in the air. Congress is considering a law that would begin a limited airport privatization program.

The nation's airports are now owned by local government authorities, and federal law requires the authorities to deposit their revenue into a reserve fund for airport improvements–a provision that has prevented private companies from buying commercial airports. No investor would sink money in a venture if all its profits had to be reinvested in the airport.

The Federal Aviation Authorization Act of 1996 (H.R. 3539), however, would allow the Department of Transportation to exempt as many as five commercial airports from the reinvestment rule. The act would also free potential buyers from a Bush administration executive order requiring them to reimburse the government for the depreciated value of airport facilities that were funded with tax dollars.

Several companies operate, but do not own, U.S. airports. Airports Group International manages airports in Albany and Burbank. British Airports Authority USA Inc., which owns airports in the United Kingdom, runs the Indianapolis airport and manages concessions at the Pittsburgh terminal.

Beyond promising better and cheaper services for travelers, airport privatization could be a boon for taxpayers. Investors paid $2.5 billion to buy the London airports. The Reason Foundation has estimated that selling the 87 largest U.S. commercial airports could generate $29 billion. And privatized airports, unlike their public predecessors, would go on local tax rolls.

Not everyone is enthusiastic about privatization. Since privatization may mean pink slips for airport bureaucrats, Airport Council International, an association of local airport officials, is lobbying against it. The Air Transport Association, an airline group, worries about higher landing fees as a result of privatization. But the legislation would forbid private airport owners from increasing landing fees by more than the rate of inflation without the approval of a sizable majority of the airlines flying into that airport.

Competitive forces should also keep fees from skyrocketing. At three privately owned airports in Scotland, for instance, where there is no cap on landing fees, they have declined 25 percent over five years.

The House Transportation and Airport Infrastructure Committee approved the bill with the privatization provision. The Senate version does not contain the privatization language. Sources close to the debate, however, say the pilot program will probably be included in the conference version of the bill.