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Airport Privatizations: Smooth Flying or a Crash Landing?

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... The project finace model also allows for long-term contracts with private actors for the operation and maintenance of street lighting assets (Scottish Futures Trust 2013). The simple regulatory structure, clear legislative provisions, and fast, transparent bidding process are prerequisites for successful project implementation (Mendoza et al. 1999;Spillers 2000;De Marco et al. 2016). ...
... Other reasons may include historically corrupt or inefficient management. (Spillers, 2000) The participation of private capital and new strategic investors not only brings in the necessary financial resources but new knowledge to materially impact existing efficiency and to develop new business fields, particularly in the non-aviation sector. Modern airports derive more than 50% of all income from non-aviation business. ...
Conference Paper
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Airport management has gone under radical structural changes due to the factors such as public financing problems, capacity constraints, technological innovations, and new management approaches. All of these changes result in three important emerging trends in airport management: commercialization, privatization, and globalization. Recently several airport terminals in Turkey transferred to the private sector with Build-Operate-Transfer (BOT) model and Long-Term-Lease agreement. This paper illustrates how emerging trends in airport industry worldwide affect Turkish airport industry by using a case study. This study based on an explorative research on TAV Airports Group, a national and international constructer, manager, and service provider. This research focuses on growth and business strategies of the company considering internationalization and globalization criteria. The result suggests that privatization of airport terminals succeeded beyond expectations in a very short period of time and this know-how is being transferred to other countries and supports internationalization practices. This is useful information for those who want to enter the airport market and for countries having emerging markets.
... In many cases, there was a full privatization, while in others, a concession was awarded to the private sector. Two main forces have been driving private sector participation in airports operations: first, an increase necessity for investments in this area as at the same time there are strong fiscal constraints exist in most of the countries [during the first decade of the 21st Century the world's airports would require an investment of $250 billion (Spillers, 2000)]; secondly, and related with those fiscal constraints, the need of governments to obtain "lump-sum" revenues by selling or by granting concessions for infrastructures. Furthermore, private sector involvement in infrastructures has been motivated "ideologically" by the tendency to look for private sector management skills as a means of addressing public sector inefficiencies (Oum et al., 2008). ...
Article
The management model of airports has long stood as a central research area in the transport sector. There are a wide range of studies that focus on the potential benefits and pitfalls of private airport management. The results of these efficiency studies have not provided irrefutable evidence for the superiority of private management over public management, but the momentum towards privatizing airports is growing. The reason for privatization has been more related with privatization revenues for governments, rather than more efficient management. The search for maximizing the sale value can have negative impacts from a welfare perspective, for example, through excessive increases in tariffs for passengers. This research reflects on the motivations for governments to privatize, and is illustrated by a case study – Portugal – in which the privatization occurred as a result of three main large drivers: 1) a bailout programme by the IMF, the EU, and the ECB; 2) a revision of the regulatory model, and; 3) the need to increase the capacity of Lisbon's airport system in the medium term.
... Mendoza et al. (1999) focus their attention on Highway 407 Express Toll Route in Canada, and they highlight that: long concession periods create value, a simple regulatory structure is advisable, bidding processes that are fast produce more value, the commitment of the public authority is important and a transparent bidding process is crucial for the success of the initiative. All the aspects related to the legislation body have proven to be critical in the development of the Santiago airport in Chile (Curtis, 2000). However, this financial scheme presents some drawbacks. ...
Article
Purpose – The purpose of this paper is to suggest the usage of the project finance (PF) scheme as a suitable mechanism to fund energy efficiency projects at the urban scale and present its advantages and adoption barriers. Design/methodology/approach – A case study is developed to renew the traffic lighting system of an Italian town via replacement of the old lamps with new light-emitting diode (LED) technology. Several partners are involved in the case project to construct a viable PF arrangement. Findings – The case study presents the viability of the proposed PF scheme that provides for acceptable financial returns and bankability. However, it also shows that the need for short concession periods may call for a public contribution to the initial funding to make the project more attractive to private investors. Practical implications – This case study is a useful guideline for governments and promoters to using the PF arrangement to fund energy efficiency investments in urban settings. It helps designing an appropriate PF scheme and understanding the advantages of PF to reduce risk and, consequently, increase the debt leverage and profitability of energy efficiency projects. Originality/value – This paper contributes to bridging the gap about the lack of works addressing the implementation of the PF mechanism in the energy efficiency sector in urban areas. The importance of this paper is also associated with the shortage of traditional public finance faced by many cities that forces to seek for alternate forms of financing.
Article
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The airport infrastructures in Pakistan are ranked very low in comparison to airports around the world. Poor airport facilities hinder the growth of aviation sector and of national economy. In their present conditions, airports fail to attract the passenger and cargo carriers. Therefore, a large number of international passengers and cargo carriers have shifted their operations from Pakistanis to Gulf and Middle East. At the time when aviation sector is growing around the globe, the need for airport infrastructure development is immense. As a result, in many developed and developing countries, the Governments are involving private sector to develop the existing airports and to build new airports. Considering the current economic situation of the Pakistan, the Government is unable to invest heavily to develop world-class airport infrastructure. In order to modernize the airports in the country, the Government of Pakistan should infuse private capital.
Chapter
IntroductionConcept and Characteristics of PPPFeatures of PPPBenefits of PPPPPP ModelsPPP in EuropePPP in the UKPPP in the USAPPP in Asia-PacificPPP in Eastern EuropePPP in AfricaConclusions
Article
It has been claimed that Asia lags behind the rest of the world in the privatization of airports. At the same time, the air transport sector has been growing quickly and this has placed enormous pressure on airport infrastructure. This paper reviews the situation and finds that the private sector is involved extensively with new airports and the upgrading of existing airports in Asia. Although the models used to accommodate the private sector appear similar to those used elsewhere, governments in Asia have retained majority control in every case. Despite the fact that some governments say that efficiency is important to them, the most common and important motive in “privatization” in Asia is to mobilize a new source of finance. Airports remain high on the agenda of public policy. Governments are concerned about abuse of monopoly powers and they want to cross-subsidize regional airports, but they lack the institutional strengths to regulate effectively. By retaining majority control, however, governments risk losing the efficiency benefits of privatization. The paper explores the reasons why airports are such difficult cases to deal with and concludes that there is a greater need than ever to be able to compare the performances of airports.
Article
Thesis (M. Eng.)--Massachusetts Institute of Technology, Dept. of Civil and Environmental Engineering, 2008. Leaf 82 blank. Includes bibliographical references (leaves 79-81). Infrastructure is of great importance to the development and economic growth of communities. Due to the increased demand on sophisticated infrastructure, governments' budgets are not anymore able to satisfy this growing need. The role of the private sector in infrastructure finance is essential, and the amount of private investments in infrastructure projects has been dramatically increasing over the last few years. Public Private Partnerships, Private Finance Initiatives, and Alternative Service Delivery methods are becoming the trends for procuring infrastructure, and by relying on Project Finance, the private sector is more willing to be involved in these projects. These methods, combined with effective risk management techniques, would provide a solution to the decreasing governments' budget. Meanwhile, the construction experience, operation efficiency, and financial capabilities of the private sector may be a way to relieve governments from the burden of infrastructure development. by Serge Emile Eid. M.Eng.
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