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35 CHAPTER FOUR ALTERNATIVE WAYS OF DOING BUSINESS As discussed in chapter one, most airports in the United States Thompson Financial Data. In the unlikely event that are operated as independent, not-for-profit entities with over- there are discrepancies between airport bond ordinances sight by a politically appointed authority, or as self-sustaining (in effect, agreements with bondholders) on the one hand enterprise funds of a governmental entity such as a city, and airline agreements on the other, bond ordinances take county, or state government. U.S. airports have been char- precedence (see Figure 29). acterized as being among the most privatized in the world Contracting of services--Airport operators routinely (e.g., see de Neufville 1999, pp. 2, 8); although they are oper- contract with private companies to assist with the finan- ated by local or state governments, the airlines often have a cial and physical planning of airports, design and con- role in capital investment decision making and other private struct facilities, provide terminal cleaning or other entities are involved in operating and providing services at routine services, operate parking facilities, and per- airports. form other functions related to managing and operating airports. The term "privatization" can refer to a broad range of activ- Private companies operating on-airport--Airport opera- ities that entail varying levels of private involvement. A report tors typically employ only 10% to 20% of the total num- by the Government Accountability Office in 1995 stated that ber of employees at an airport (de Neufville 1999, p. 9). "the privatization spectrum can include contracting out, Airlines, rental car companies, concessionaires, ground publicprivate partnerships, vouchers, and franchising, as well transportation companies (taxis, limousine operators, as the actual sale--divestiture--of government assets and etc.), cleaning companies, etc., constitute the majority of operations" (Issues: Privatization/Divestiture Practices in personnel at an airport. Other Nations 1995, p. 1). Figure 28 shows the continuum of Master concessionaires--Some airport operators have private involvement at airports. negotiated master concessionaire agreements with pri- vate companies to oversee the development of terminal This chapter addresses the spectrum of privatization, par- concessions. Examples include BostonLogan, Chicago ticularly as it applies in the United States, by discussing: O'Hare, Pittsburgh, Washington National, and New York's LaGuardia airports. Partial privatization--ways of doing business that Private terminal development--Airlines have built and involve varying degrees of private-sector involvement operate(d) terminals at numerous airports around the in the management, capital investment decision making, country, including Terminals A, C, and E at Dallas/Fort financing, and pricing of airport facilities and services. Worth International Airport, Terminal A at Boston Full privatization--outright sale of airport assets. Logan International Airport, and Terminal 4 at Los Angeles International Airport. In other cases, third par- PARTIAL PRIVATIZATION ties have built terminals for use by multiple airlines, including Terminal B at BostonLogan, and the Inter- Private involvement in the management and operation of U.S. national Arrivals Building at John F. Kennedy Interna- airports, starting with the most typical practices to the more tional Airport. innovative, includes: Private airport operators--The Indianapolis Airport Authority and Susquehanna Area Regional Airport Airline capital decision-making involvement--Airlines Authority each entered into 10-year agreements with often have a role in capital investment decision making BAA plc (formerly the British Airport Authority) to through majority-in-interest provisions of airportairline manage and operate Indianapolis International Airport agreements. and Harrisburg International and Capital City airports Private capital--In the United States, the majority of on a day-to-day basis, and to upgrade and/or develop financing comes from private sources. An estimated 58% major new facilities. Ownership of the airports did not of U.S. airport capital investments in 2000 through 2004 change under the agreements, only responsibility for were funded by bonds and other forms of debt through managing and operating the airports. BAA is no longer the private financial markets, according to ACINA, managing the Harrisburg airports, but is still operating based on information from FAA, U.S. Treasury, and in that capacity at Indianapolis International Airport.