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Agenda Item 2Organizational Structures of

Airports, including Commercialization

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OverviewANSConf 2000

ICAO’s Policies §§ 10-17

Chapter 2 of the Airport Economics Manual

Circular on Privatization

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ANSConf Recommendations 1 – Autonomy in the operation 2 – State responsibilities3 – Guidance on commercialization6 – Performance parameters9 – Obligations of autonomous operators10 – First resort mechanism11 – General/business aviation airport access12 – Independent mechanism for economic

regulation13 – Best commercial practices

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Network of airports and cross-subsidization of airports

States to decide

Full transparency

Guidance by ICAO (ANSConfRecommendation 3)

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ICAO’s Policies in Doc 9082/7

Organizational and managerial issuesAutonomy and privatizationIndependent mechanism for economic regulationPerformance parametersBest commercial practices

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Chapter 2 of the Airport Economics Manual

Airports within a government departmentAutonomous airport entitiesAutonomous civil aviation authorityPrivate involvement in airport ownership and operationsSystems, networks and alliances

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Airports managed by a government department

A separate entity or department

Separate accounts

Internal accounting system

Report to DGCA

Decision-making authority

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Decision-making authority

Head of department

Daily operationsPurchases of suppliesNegotiate concessions and rental agreements

Higher level (DGCA)

Approve charges (in consultation)Major purchases or investmentsMajor concession and rental agreements

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Reasons for establishing an autonomous airport entity

Improve efficiency and financial situation

Investment financing

States relieved from major investments

Development of non-aeronautical activities

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Charter of an autonomous airport entity

Describes services and areasAssets – whose property, value, debt?Financial independenceFinancing plan, recovery of shortfallsBoard of directors or CEOWhom to report to

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Autonomous airport entity -Organization

Corporation

Board of directors

General manager

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Advantages of financial independence

Closer control of revenues and expensesNegotiate loansStronger negotiation position in concession contracts and industrial relationsTake advantage of special offers and discountsAccess to generated convertible currencyBetter financial terms for staff

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Additional advantages of autonomous entities

Breeding a business cultureLower expenses per traffic unitReduced financing burden on governmentsImproved quality of serviceDistinction between regulator and provider

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Autonomous Civil Aviation Authority

One airport and limited air traffic activityAvoid duplication of costs (administration, overheads etc)Avoid rivalryReduced need for public fundsFinancial independence

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Private sector ownership and control

Transfer of full or majority ownership of facilities and services to the private sector.

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Options for private participation

Management contract

Lease

Transfer of minority ownership

Private sector ownership and control

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Management contractManagement of airport transferred for a limited period of time and for a feeProfessional managementDoes not include development projects

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Leases/concessionsShort-, medium-, long-termAirport transferred for management and development for a fixed periodBOT, BOOT, BTO, etc

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Transfer of minority ownershipPartial transfer of ownership to the private sectorCan be progressive

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Private sector ownership and control

Majority, orFull ownership transferred

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Reasons for privatization and private participation

Financing options

Privatization as a source of revenue

Major airports considered as commercial entities

Emergence of a global airport management industry

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Cautionary FactorsAirports essentially a monopoly of critical importance for economySafeguards required to prevent overcharging, and ensure national air transport objectives are metEnsure non-aeronautical profits contribute to aeronautical lossesGovernment able to inspect accounts to prevent abuse

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Responsibilities of States

Provision of airports and air navigation services (Article 28)Respect other Articles (Art. 11, 15, 37, etc.)Safety and security (certification)

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Circular on Privatization of

Airports and Air Navigation Services

ContentsDescription of termsDevelopments in ownership and managementICAO policies and guidanceOwnership and management optionsPreparing for change in ownership and management structure, including regulatory aspectsSelection of private provider and contract documentation

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Circular on Privatization -some definitions

Autonomous airport authorityPrivatizationPrivate participation and private involvementCorporatizationCommercialization

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Privatization – a gradual process

United Kingdom: government corporation > government-owned company > shares

New Zealand, China, Malaysia and South Africa: government-owned company > shares

Australia: government corporation > leases

Latin America: private participation directly (leases)

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Preparing for change in ownership and managementPlanning and consultationStudy of financial and managerial situationState to decide on optionsGradual changeManagement of residual facilities and servicesRevenues from privatizationChange in legal frameworkOther regulatory aspectsHuman resources issues

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Conclusion

There is no best option for global application

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Discussion

questions?Sharing of experience