Considering and Evaluating Airport Privatization

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ACRP
AIRPORT
COOPERATIVE
RESEARCH
PROGRAM
REPORT 66
Sponsored by
the Federal
Aviation
Administration
Considering and Evaluating
Airport Privatization
ACRP OVERSIGHT COMMITTEE* TRANSPORTATION RESEARCH BOARD 2012 EXECUTIVE COMMITTEE*
CHAIR OFFICERS
James Wilding Chair: Sandra Rosenbloom, Professor of Planning, University of Arizona, Tucson
Metropolitan Washington Airports Authority ViCe Chair: Deborah H. Butler, Executive Vice President, Planning, and CIO, Norfolk Southern
(retired) Corporation, Norfolk, VA
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Richard de Neufville
Massachusetts Institute of Technology Michael W. Hancock, Secretary, Kentucky Transportation Cabinet, Frankfort
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Susan Martinovich, Director, Nevada DOT, Carson City
Steve Grossman
Joan McDonald, Commissioner, New York State DOT, Albany
Jacksonville Aviation Authority
Michael R. Morris, Director of Transportation, North Central Texas Council of Governments, Arlington
Kelly Johnson
Northwest Arkansas Regional Airport Authority Tracy L. Rosser, Vice President, Regional General Manager, Wal-Mart Stores, Inc., Mandeville, LA
Catherine M. Lang Henry G. (Gerry) Schwartz, Jr., Chairman (retired), Jacobs/Sverdrup Civil, Inc., St. Louis, MO
Federal Aviation Administration Beverly A. Scott, General Manager and CEO, Metropolitan Atlanta Rapid Transit Authority, Atlanta, GA
Gina Marie Lindsey David Seltzer, Principal, Mercator Advisors LLC, Philadelphia, PA
Los Angeles World Airports Kumares C. Sinha, Olson Distinguished Professor of Civil Engineering, Purdue University,
Carolyn Motz West Lafayette, IN
Airport Design Consultants, Inc.
Thomas K. Sorel, Commissioner, Minnesota DOT, St. Paul
Richard Tucker
Daniel Sperling, Professor of Civil Engineering and Environmental Science and Policy; Director, Institute
Huntsville International Airport
of Transportation Studies; and Acting Director, Energy Efficiency Center, University of California, Davis
EX OFFICIO MEMBERS Kirk T. Steudle, Director, Michigan DOT, Lansing
Douglas W. Stotlar, President and CEO, Con-Way, Inc., Ann Arbor, MI
Paula P. Hochstetler
C. Michael Walton, Ernest H. Cockrell Centennial Chair in Engineering, University of Texas, Austin
Airport Consultants Council
Sabrina Johnson
EX OFFICIO MEMBERS
U.S. Environmental Protection Agency
Richard Marchi Rebecca M. Brewster, President and COO, American Transportation Research Institute, Smyrna, GA
Airports Council International—North America Anne S. Ferro, Administrator, Federal Motor Carrier Safety Administration, U.S.DOT
Laura McKee LeRoy Gishi, Chief, Division of Transportation, Bureau of Indian Affairs, U.S. Department of the
Airlines for America
Interior, Washington, DC
Henry Ogrodzinski
John T. Gray II, Senior Vice President, Policy and Economics, Association of American Railroads,
National Association of State Aviation Officials
Washington, DC
Melissa Sabatine
American Association of Airport Executives John C. Horsley, Executive Director, American Association of State Highway and Transportation
Robert E. Skinner, Jr. Officials, Washington, DC
Transportation Research Board Michael P. Huerta, Acting Administrator, Federal Aviation Administration, U.S.DOT
David T. Matsuda, Administrator, Maritime Administration, U.S.DOT
SECRETARY Michael P. Melaniphy, President and CEO, American Public Transportation Association, Washington, DC
Christopher W. Jenks Victor M. Mendez, Administrator, Federal Highway Administration, U.S.DOT
Transportation Research Board Tara O’Toole, Under Secretary for Science and Technology, U.S. Department of Homeland Security,
Washington, DC
Robert J. Papp (Adm., U.S. Coast Guard), Commandant, U.S. Coast Guard, U.S. Department
of Homeland Security, Washington, DC
Cynthia L. Quarterman, Administrator, Pipeline and Hazardous Materials Safety Administration,
U.S.DOT
Peter M. Rogoff, Administrator, Federal Transit Administration, U.S.DOT
David L. Strickland, Administrator, National Highway Traffic Safety Administration, U.S.DOT
Joseph C. Szabo, Administrator, Federal Railroad Administration, U.S.DOT
Polly Trottenberg, Assistant Secretary for Transportation Policy, U.S.DOT
Robert L. Van Antwerp (Lt. Gen., U.S. Army), Chief of Engineers and Commanding General,
U.S. Army Corps of Engineers, Washington, DC
Barry R. Wallerstein, Executive Officer, South Coast Air Quality Management District,
Diamond Bar, CA
Gregory D. Winfree, Acting Administrator, Research and Innovative Technology Administration,
U.S.DOT
*Membership as of March 2012. *Membership as of March 2012.
A I R P O R T C O O P E R AT I V E R E S E A R C H P R O G R A M
ACRP
REPORT 66
Considering and Evaluating
Airport Privatization
Sheri Ernico
Bruce Boudreau
LeighFisher
Burlingame, CA
Dan Reimer
KapLan Kirsch & rocKweLL LLp
Denver, CO
Steve Van Beek
LeighFisher/eno TransporTaTion FoundaTion
Reston, VA
Subscriber Categories
Aviation • Administration and Management • Finance
Research sponsored by the Federal Aviation Administration
TRANSPORTATION RESEARCH BOARD
WASHINGTON, D.C.
2012
www.TRB.org
AIRPORT COOPERATIVE RESEARCH PROGRAM ACRP REPORT 66
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C O O P E R A T I V E R E S E A R C H P R O G R A M S
CRP STAFF FOR ACRP REPORT 66
Christopher W. Jenks, Director, Cooperative Research Programs
Crawford F. Jencks, Deputy Director, Cooperative Research Programs
Michael R. Salamone, ACRP Manager
Theresia H. Schatz, Senior Program Officer
Eileen P. Delaney, Director of Publications
Margaret B. Hagood, Editor
ACRP PROJECT 01-14 PANEL
Field of Administration
Shirley J. Ybarra, Reason Foundation, Washington, DC (Chair)
Mark Earle, Colorado Springs Airport, Colorado Springs, CO
Timothy Karaskiewicz, General Mitchell International Airport, Milwaukee, WI
Dana R. Levenson, Massachusetts Department of Transportation, Boston, MA
Charles T. “Skip” Miller, Louisville Regional Airport Authority, Louisville, KY
Maria Sheridan, DM AIRPORTS, LTD., Morristown, NJ
Timothy K. Skipworth, American Airlines, Inc., Fort Worth, TX
Kevin C. Willis, FAA Liaison
Liying Gu, Airports Council International—North America Liaison
Nancy Kessler, US Department of Transportation Liaison
Martine A. Micozzi, TRB Liaison
AUTHOR ACKNOWLEDGMENTS
This guidebook (the “Guidebook”) was prepared as part of ACRP Project 01­14 by a research team of
recognized experts in airport business, finance, governance, law, and privatization. LeighFisher was the pri­
mary research consultant. Sheri Ernico, Director at LeighFisher, was the Principal Investigator. The other
authors were Steve Van Beek of LeighFisher/Eno Transportation Foundation for the emerging domestic
issues and policy matters; Dan Reimer of Kaplan Kirsch & Rockwell LLP on the regulatory and policy
framework; Simon Morris, Richard Sharp, and Jessica Dahlstrom of LeighFisher on international airport
privatization; Phil Bates of LeighFisher on the non­airport privatization in the U.S. transport sector; Bruce
Boudreau of LeighFisher who contributed to conceptual content; Matt Townsend of LeighFisher who
assisted in the JFKIAT and Indianapolis case studies; Dave Vondle of Vondle & Associates who assisted
on the Stewart International Airport case study; and Ann Graham of the University of Westminster who
assisted with the literature search and reviewed the international airport privatization chapter.
The research team would like to express its gratitude to the members of the project panel for their sup­
port and insightful comments throughout this research project. The research team would also like to thank
the airport staff, staff at the FAA and U.S.DOT, airlines, private airport operators and developers, rating
analysts, international regulators, investors, lenders, labor leaders, and others who took the time to share
their insights, experience, and opinions with the research team.
F O R E W O R D
By Theresia H. Schatz
Staff Officer
Transportation Research Board
ACRP Report 66: Considering and Evaluating Airport Privatization is a guidebook that
assists airport operators, policy makers, and other relevant stakeholders as they consider and
analyze the potential advantages and disadvantages of implementing various approaches to
airport privatization. The guidebook covers a range of potential privatization options, from
service contracts to private airport ownership or development. In addition, the guidebook
includes case studies conducted at a variety of airports both within the United States and
internationally.
Interest in airport privatization is increasing, especially as local and regional governments
look for ways to make their airports as efficient, competitive, and financially viable as
possible. Consideration by communities, governing boards, airport officials, and other
stakeholders on whether to privatize all or part of an airport is a significant decision with
long­term impacts. As such, the decision­making process must ensure that a thorough and
complete review is undertaken, so financial and other implications of privatization are fully
understood and, hence, an informed, transparent decision can be made. Private­sector
participation in airports—through ownership, operation, management, or new investment
programs—can take many forms, including outsourcing certain functions; management
contracts; public­private partnership (P3) agreements; design­build­finance­operate devel­
opments; outright sale or long­term lease of assets; and other private finance initiatives. Full
airport privatization has been adopted or considered in various forms at many foreign air­
ports but only at a limited number of U.S. airports while a wide range of partial airport
privatization has existed at U.S. airports for many years.
The Airport Privatization Pilot Program, under 49 U.S.C. Section 47134, provides a
limited number of airports in the United States with a special vehicle for full airport
privatization, including certain exceptions from existing legal disincentives, and continues
to generate discussion among airport operators and owners, governing boards, and airport
officials. Although there have been a number of applications for the program since it was
created in 1996, only one applicant completed the process as of this publication (Stewart
International Airport), which subsequently reverted back to public operation. As the dis­
cussion of these issues continues, U.S. airport stakeholders can benefit from an objec­
tive presentation of the international experience with airport privatization and the relative
advantages and disadvantages of privatization for U.S. airports.
This report was developed under ACRP Project 01­14. Also contained in the guidebook
are Appendices A and B; Appendices C through H, which provide additional background
information as part of the research conducted in preparing the guidebook, are on the CD.
It is understood that the research was concluded as of December 2011 and there are
currently some federal regulatory changes being contemplated. For example, the FAA is
currently revisiting its policy on the issue of waiving the repayment of federal grants for
airports privatized outside the Airport Privatization Pilot Program. Please keep in mind,
there are several references in the guidebook with respect to this one issue for full privatiza­
tion outside the APPP that could be impacted by the FAA’s contemplated change in Order
5190.6B. It is recommended that the user of the guidebook reference the most current
legislation and policy in place at the time.
C O N T E N T S
1 Chapter 1 Summary
1 1.1 Purpose and Objectives of Guidebook
1 1.2 Privatization Motivations and Drivers
1 1.3 Generic Privatization Models
2 1.4 Examples of Specific Strategies
4 1.5 Evaluation of Privatization Strategies
7 1.6 How to Decide Which Strategy Is Best
8 1.7 What Makes the U.S. Airport Model Different?
9 1.8 Guidebook Organization
10 Chapter 2 The U.S. Context and Generic Privatization Models
10 2.1 Privatization Continuum and Generic Models
11 2.2 Extensive Privatization Exists Today at U.S. Airports
11 2.3 Evolution of Airport Ownership and Governance in the United States
12 2.4 Forms of Airport Governance
13 2.5 What Makes the U.S. Airport Model Different?
16 2.6 Focus of Research
18 Chapter 3 Service Contracts
18 3.1 Specific Strategies
18 3.2 Examples of Service Contracts
19 3.3 Legal and Regulatory Considerations
19 3.4 Evaluation of Service Contracts
21 Chapter 4 Management Contracts
21 4.1 Specific Strategies
21 4.2 Examples of Management Contracts
25 4.3 Legal and Regulatory Considerations
26 4.4 Evaluation of Management Contracts
28 Chapter 5 Developer Financing and Operation
28 5.1 Specific Strategies
31 5.2 Examples of Developer Financing and Operation
36 5.3 Legal and Regulatory Considerations
38 5.4 Evaluation of Developer Financing and Operation
42 Chapter 6 Full Privatization
42 6.1 Specific Strategies
42 6.2 Examples of Full Privatization
45 6.3 Legal and Regulatory Considerations
48 6.4 Evaluation of Full Privatization
56 6.5 Frequently Asked Questions About Full Privatization
57 6.6 Relevance and Lessons Learned From International Airport Privatization
and Non­Airport Privatization in the U.S. Transport Sector
60 Chapter 7 Other Examples
60 7.1 Green­Field Private Airport Development
61 7.2 Examples of ‘Reverse’ Privatization
63 Chapter 8  Decision Tree Matrix, Evaluation Checklist,
and Process
63 8.1 Decision Tree Filter and Matrix
63 8.2 Owner’s Goals and Objectives
65 8.3 Stakeholder Views
66 8.4 Complexity, Risk, and Other Implementation Issues
68 8.5 Valuation and Valuation Drivers
70 8.6 Financial Metrics
72 8.7 Risks and Mitigants
80 8.8 Evaluation Checklist
83 Chapter 9 Case Studies
83 Summary of Case Studies
87 9.1 Indianapolis Airport Authority
90 9.2 JFKIAT Terminal 4
93 9.3 Boston Terminal A
95 9.4 Stewart International Airport
97 9.5 Chicago Midway International Airport
100 9.6 Morristown Municipal Airport
 104  References
A-1 Appendix A Abbreviations and Acronyms
B-1 Appendix B Glossary of Privatization Terms
C-1 Appendices C Through H
Note: Many of the photographs, figures, and tables in this report have been converted from color to grayscale
for printing. The electronic version of the report (posted on the Web at www.trb.org) retains the color versions.