Air pollution, water pollution, noise, traffic jams, loss of biodiversity, expropriation of land... For those who oppose airport development, fierce activists, there is no shortage of arguments. Airports generate many negative externalities for society. In economics, externalities are costs or benefits that affect a third party who is not involved in the economic transaction. Airports generate some negative externalities.
But they also generate many positive ones. Airports stimulate regional and national economies. Airports provide access to distant markets. They attract visitors, which boosts the tourism industry. They are a major factor in business location decisions. They provide vital competitiveness for innovative industries. They are often the only means of transport to remote areas, providing medical services or raising awareness of cultural differences. Airports promote trade, connect nations, airports bring people together.
Governments should be aware that the real value of an airport goes beyond the accounting books.
Given the impact which has an airport in the community, Can we privatise it as if it were a humble shoe shop?
The profit and loss account of an airport does not include any of these externalities. The impact of an airport on the region cannot be quantified in dollars, euros or yuan. This is why the debate on airport privatisation is often misguided.
Yes, the airports can be profitable within the airport premises, but they also generate money - and bills - beyond their limits. Government regulatory policies should ensure that the private investor should not only consider the benefits of the airport business. Private operators can eradicate inefficiency, but they are also more likely to extract dividends at the expense of future airport development, and thus the development of the region.
Don't get me wrong, I am a firm believer in airport privatisation. Brings efficiency to the sector and awareness of the competition.. However, we cannot expect the private sector to think selflessly about the long-term development of the region. If an airport is to be 100% privatised, it is compulsory to have a strong and independent regulatory body.
Pricing, compliance with safety standards, quality of service levels, noise abatement programmes, operational contingency plans, emergency plans, investment plans and others should be strictly regulated and monitored by an independent body. The regulatory body should also have the power to impose penalties for non-compliance. Even if necessary, it should be able to withdraw the operator's licence.
The privatisation of airports has become a global phenomenon. Governments in Europe, Asia, Australia, Latin America and the Caribbean are selling off their public assets. Some are looking to quickly solve the problem of empty treasury coffers. Governments should be aware that the real value of an airport goes beyond the books. Before selling, a sound regulatory framework must be put in place. If you don't, no matter how much money you get on auction day, you are likely to regret it years later.
