Economically Challenged

Airports meet in Boston, and the industry’s business model tops the issues list


BOSTON — Some 2,300 airport executives and professionals from around the world gathered here in September for the ACI World/North America Conference & Exhibition. If there was consensus among the group, it was that there are serious issues facing airports globally, and they, like airlines, will need to rethink their business models. That was the core message from keynoter Dr. Alfred Kahn, who says privatization should be encouraged and rates and charges policies rethought. Security remains top of mind, with smaller international airports concerned that mandates often put undue stress on their ability to comply. Other hot buttons: congestion pricing and slot auctions; runway incursions; the environment; and airline consolidation, among others.

Despite the erratic ups and downs in the industry lately, despite record oil prices and increasing congestion, despite new and newer airline fees and heightened airport security; the most refreshing concensus is that everyone sees the industry moving continually in one direction…forward.

Director of ACI World Angela Gittens, who formerly headed up airports in Miami and Atlanta, highlighted the relationship of airports and airlines — citing rising operating costs, mergers, and bankruptcy as causes for long-term planning on all airport operational fronts. Gittens notes that the industry should expect a growth of 4 percent globally during the next 20 years. That growth could be the result of increasing privatization, which Jim Cherry, president and CEO of Aeroports de Montreal (ADM), says is a reality as “ACI is fundamentally opposed to regulation.”

Dr. Kahn, a 91-year old spry man known as the “father of deregulation” and professor emeritus at Cornell University, shares Cherry’s sentiment on privatization, stating that “to depend on Congress is to wait forever; [the industry] must be privatized.”

Dr. Kahn asks, “Have we reached a point at which we can’t continue to make it easier for people to travel all over the world?” His reply was, with oil at $100 per barrel, things may be manageable; at $150 per barrel … the situation could drastically change travel habits.

Regarding airport congestion, Dr. Kahn says the current system of weight-based pricing by airports is absurd. “You couldn’t devise a system of pricing that was more perfectly prepared to create congestion.” he says. Kahn presses the need for more intelligent pricing as well as more inter-airport competition.

“Leave it to the market, intelligent pricing, and the adaptability of the airlines,” says Dr. Kahn. Toward that end, he also calls for the privatization of the air U.S. air traffic control system.

John D. Clark III, A.A.E., executive director and CEO of the Jacksonville Aviation Authority, and the incoming chair of ACI-NA, finds merit on Dr. Kahn’s position.

Says Clark, “I agree with him 100 percent; in fact, I have this conversation often. An interesting thing to me about this industry is, year after year we do the same thing but there seems to be an expectation of a different result. There is a hesitation to truly change business models. It’s so institutionalized.

“Everything we do [at Jacksonville], we look at what kind of return are we going to get on that investment? And there are things that you decide that you just can’t get the appropriate return, so there’s got to be another way, and you don’t do it.

“At some point I think the airlines and airports have got to come together and understand that we’re really in the same business.”

Clark also agrees with Dr. Kahn on the need to privatize the ATC system in order to get it modernized, which he sees as the system’s number one challenge. “A privatized air traffic system, I think, would benefit the U.S.,” he says. “Why couldn’t we allow private interests to put the capital investment in and recoup the costs? We don’t have to do it in one fell swoop. Just like they have demonstration programs at TSA, or the FAA pilot program for privatization, why couldn’t you take a region of the country and begin with some kind of incubation program? FAA already contracts for some tower operations.”

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