Airport Privatization

Airport Privatization
Privatization means reducing government involvement in the provision of services to State Corporation. In reference to airport privatization, the government hires private sectors to provide services such as cleaning, shuttle transportation, and operation of various service activities. In the United States, the first commercial airport was mostly controlled private sectors which play the significant role which offers services such as leasing terminals and delivering most airport services. This private participation allows the airports to operate efficiently, efficient and to be commercially oriented in all investment decision .majority or the airports across the world, are managed and owned by the state government, (De Neufville, 1999). Currently, this scenario has change and the countries now lease, sell or dispose of the majority of its shares for an airport to reduce its participations to the private sectors.In the case of United States, economic and legal constraints have discouraged the increasing rates of privatization of US airports. In contrary federal aviation administration has extensively permitted some forms of privatization that include giving authority private sectors to build and lease terminals or outsourcing management staffs, perhaps they have shown a lot of dangers that is associated with the full privatization of the company.
Furthermore, many commercial airports across the world have tried to reduce their dependence on the government assistance and therefore make their operation more businesslike.

US airports have formed a mechanism of reducing their operation costs and facilitate proper service delivery by collaborating with private business investors .wider range of services such as cleaning, ground transportation, and retail recession are offered by private tenants or contractors in most of the US commercial airports such as Newark, LaGuardia, and Kennedy airports. Many have merged with private entrepreneurs in a manner such that its diversify and expand their sources of income .Flexible and short-term agreements made has facilitated the airlines and airports, have allowed them to negotiate their terms easily and to retain more of their revenue. Moreover, airport development, like any other private sector project, needs to be financed by both private and capital market. However, the public airport gets funding through passenger facility charges, airport development grants, and tax-exempt debts.
Privatization programs in many countries have gain popularity within many development projects, such as railroads, trucking, shipping, telecommunication, and airports. This is enhanced by desirable privatization policies that aim at reducing the sizes of public enterprises with a goal of improving its economic efficiency .there are several motivating factors that have to boost the extent in which commercial airports needs to be privatized. The revenue generated by this airport are significantly high and private ventures requires business where its returns are high within the shortest time possible.Secondly, several capitalized organization that have well train management personnel with knowledge in airport investment and development has triggered may require commercial airports to hire these services to boost their net returns and profitability in general, (Zhang et al., 2003).
It has proven difficult to predict the detrimental nature in which privatization may influence local and state governments, passengers and airliners because the whole process involves many parties and any assumption made may pose a challenging scenario. Local governments may sell their airports, but if they fail to restrict revenue diversion, then financial windfall is experienced. Also, they may gain by the addition of airport to their local tax basest has been difficult to express the percentages that the municipal gain or loss upon disposing of its airport since the airport market price, primarily depend on the forecast of its future earnings which consequently relies on subsidy grants and constraints that are imposed by various levels of governments. On the case of airliners, privatization depends on how charged rates are regulated that airlines pay to use the airport services. The policies stated may prohibit the airport from raising rates and fees above the market-based rates,( Matsumura et al.,2012).
References
De Neufville, R. (1999). Airport privatization: issues for the United States. Transportation Research Record: Journal of the Transportation Research Board, (1662), 24-31.
Zhang, A., & Zhang, Y. (2003). Airport charges and capacity expansion: effects of concessions and privatization. Journal of Urban Economics, 53(1), 54-75.
Matsumura, T., & Matsushima, N. (2012). Airport privatization and international competition. Japanese Economic Review, 63(4), 431-450.
Oum, T. H., Adler, N., & Yu, C. (2006). Privatization, corporatization, ownership forms and their effects on the performance of the world’s major airports. Journal of Air Transport Management, 12(3), 109-121.