Indianapolis Airport Passes Test in Overseas Privatization

Mar. 13--Elected officials saw it as a novel concept: An overseas company was willing to manage a major Indiana transportation facility in one of the largest public-private partnerships of its kind.

That was 1995. More than 10 years later, the facility, Indianapolis International Airport, remains under the management of London-based BAA, the world's largest airport operator.

Long seen as a test case for overseas privatization, the arrangement has drawn renewed attention amid plans by Gov. Mitch Daniels to lease the Indiana Toll Road to Macquarie-Cintra, an Australian-Spanish consortium. Under the terms of the 75-year lease, the partnership would pay the state $3.85 billion up front.

The proposal, which faces final House and Senate votes this week, has kindled fierce public opposition, emerging in some minds as a symbol of foreign outsourcing and a post-9/11 security risk.

The national uproar that developed in recent days in response to a bid by a subsidiary of Dubai Ports World to take over six U.S. shipping ports also has served to highlight the long-standing airport agreement here.

Supporters of the Toll Road lease hail the Indianapolis airport's relatively trouble-free operation as evidence that a privately run road can work and say there's no point in comparing the two.

But House Minority Leader B. Patrick Bauer, who has led the opposition to the Toll Road lease, disagrees, saying he believes the Toll Road and airport agreements provide a "natural comparison."

"It's a changing world," said Bauer, D-South Bend. "Since the war on terror began, all transportation infrastructure -- including highways, ports and airports -- has become very vital."

Not that Bauer is opposed to the airport deal. But that's because the United States, he says, has a friendlier relationship with BAA's homeland of England than with Australia and Spain.

In remarks underscoring the seal-the-borders attitude that has permeated the Toll Road debate, Bauer said the airport agreement is "with a country we are not greatly in debt to (and) that has always been on our side."

The same, of course, can be said of modern-day Australia and Spain.

In response, Indianapolis airport officials and national aviation experts say comparisons between the two deals offer few parallels and ignore fundamental differences in the way roads and airports are run.

"Conceptually, there are drastic differences," said Lacy M. Johnson, president of the Indianapolis Airport Authority, the public board that oversees BAA.

Much like Daniels has touted the Toll Road lease, the BAA contract was ballyhooed in 1995 as a pioneering endeavor that would deliver new efficiencies. It drew little opposition. Indianapolis became the nation's first major airport to be privately run.

The agreement was conceived as part of a series of reforms that began in the 1990s under then-Mayor Stephen Goldsmith, who partially privatized the IndyGo bus system, trash collection and other services. His successor, Mayor Bart Peterson, entered into an agreement with a private company to operate the city's water system.

In drawing out the differences between the airport contract and the proposed Toll Road lease, Johnson and others say that while BAA runs the airport's day-to-day operations, its budget and all airport policies are set by the public Airport Authority.

In contrast, the state would have no say over the Macquarie-Cintra consortium, though ostensibly it could walk away from the deal if the partnership fails to uphold any part of the contract.

Moreover, BAA did not pay anything for the right to operate the airport -- the primary draw of the Toll Road deal. Rather, the company was hired, exclusively, to streamline operations and expand the airport's retail offerings.

In return for its services, BAA is paid an annual fee (which has ranged during the years from about $1 million to $2.4 million) that is based on how much the airport collects in landing, parking and other fees.

BAA's agreement expires at the end of 2008.

Airport authority officials and aviation experts pointed out that privatization efforts at U.S. airports elsewhere have floundered because current federal regulations and industry forces do not favor privatization. Indianapolis remains the only major U.S. airport where all operations are privately managed.

In contrast, many transportation and road industry experts believe that private lease agreements will help anchor future road construction projects as the nation's need for new and expanded roads grows.

ABOUT BAA: BAA PLC, world's largest airport operator.

--Headquarters: London.

--Chief executive officer: Mike Clasper.

--Worldwide employees: About 12,500.

--Indianapolis employees: About 400.

--2005 net profits worldwide: $545 million (in pounds).