NE1: Airport Privatization Act (Failed)

[cinyc]

Airport Privatization Act

You must be logged in to read this quote.

Sponsor: Representative Deus naturae

Debate on this bill will be open for 72 hours, or until around 5:30PM on January 17, unless extended or modified.  Representative Deus is encouraged to speak on behalf of the bill within the next 36 hours.  If he does not, because there is other pending legislation in the proposed legislation thread, we will move on to the next bill.

The floor is now open to debate.

[Deus Naturae]

Thank you, Mr. Speaker.

There are a number of reasons why we should privatize our airports. The first and most simple one is that there is simply no reason to keep them public. Private companies are just as capable of running an airport, so we may as well not use taxpayer money to do so.

Secondly, private companies are typically better equipped to run airports. Because they are required to profit, companies operate much more efficiently. Conversely, public airports are rarely evaluated in terms of net profitability, and so are not as concerned about cost-effectiveness. There is less risk of "white elephants," projects whose costs greatly exceed what they can generate in revenues.

Public airports are typically slow to respond to changing market conditions. Landing fees are often out of date (ie, below or above what an appropriate market fee should be) and public airports are less able to maximize revenue generation via retail contracts, real estate development, hotel accommodations, etc.

Customers services also improve upon privatization. Air travelers who have used London's Heathrow or Gatwick airports (privatized via sale in 1987), the new international Terminal 3 at Toronto (developed via BOT/LDO and opened in 1991), or the new Pittsburgh terminal (whose concessions are managed privately by BAA under a 15-year lease) will have experienced airport retail that differs dramatically from other U.S. airports in three respects: 1) the amount of retail space is several times as much as in other terminals of comparable size; 2) the retailers include numerous national and international brand-name outlets; and 3) the prices charged are not high “airport prices” but are the same as one would find in the local shopping mall.

The new privatized retail approach produces a situation in which all parties are better off. Air travelers like the lower prices and greater variety of goods and services, as proven by per-passenger sales two to three times higher than in traditional terminals. The airport operator is happy, because the higher sales volume produces higher net revenues. And the airlines are happy because concession revenues cover a higher fraction of total airport costs.

For more in-depth arguments, see (thank you to CJO Dallasfan for showing me the first one):
http://reason.org/news/show/guidelines-for-airport-privati
http://www.fee.org/the_freeman/detail/another-reason-for-airport-privatization

[Goldwater]

I fully endorse this legislation, if that makes a difference to anyone.

[Deus Naturae]

I fully endorse this legislation, if that makes a difference to anyone.

Thank you, Senator. Your input is appreciated.

I would also like to say that the 5-year deadline is arbitrary, and could easily be moved forward or backward.

[sentinel]

You need to change "public airports" to "publicly owned." Also, need an exception for national guard/military.

Also, why not simply allow the government to sell airports as opposed to mandating it?

[Deus Naturae]

[quote author=Amendment Offered]
Airport Privatization Act
1. Effective 1 January 20169, all publicly owned airports which receive a majority of their funding from the regional government of the Northeast, with the exception of military bases, must be transferred to private ownership.
2. Privatization negotiations and agreements for airports specified in Section 1 must be handled by the highest government authority which provides funding to the airport in question, with the exception of the federal government.will be handled by the regional government of the Northeast.
3. Specified airports which have not been transferred to private ownership by the deadline specified in Section 1 shall immediately be sold at auction to the highest bidder, and the money acquired as a result shall go to the regional government.
4. All regional funding for publicly owned airports not within the category specified in Section 1 will cease effective upon the passage of the next regional budget.
5. All governments of jurisdictions with the Northeast are hereby encouraged to privatize their airports.

[sentinel]

The amendment is definitely an improvement

[Cincinnatus]

The amendment is definitely an improvement

I agree, however, I'm still skeptical of this process.  I'll have to research further..

[Deus Naturae]

The amendment is definitely an improvement

I agree, however, I'm still skeptical of this process.  I'll have to research further..

If there is anything specific which concerns you, I would be glad to try and address it.

[cinyc]

I can't support this bill as currently drafted.  What happens to smaller, money-losing airports that nobody wants to bid for?  It's one thing to privatize a large airport like Philadelphia International, Boston Logan or New York JFK.  It's another thing to privatize a small airport with limited commercial service, like Massena International Airport in New York's north country.

Also, what happens to airports run by a quasi-governmental authority, like the Port Authority of New York and New Jersey?  Under the bill as drafted, they won't get sold - when they are probably the airports most in need of privatization.

[Deus Naturae]

Cinyc, would this amendment satisfy your first objection?

You must be logged in to read this quote.

As for your second objection, if an airport receives the majority of its funding from an interstate compact like the PANYNJ, I'm afraid there isn't much me can do short of going back to the original text or adding a new clause specifically singling out airports owned by interstate compacts or something similar.

[Lincoln Republican]

I am opposed to privatizing airports.

There are several services which are better handled by the public sector, and airports are one of them.

I fear privatization of airports would lead to increased problems in the future, one being increased fees to consumers, another being, I believe, national security would be more at risk.   

[Deus Naturae]

I am opposed to privatizing airports.

There are several services which are better handled by the public sector, and airports are one of them.

I fear privatization of airports would lead to increased problems in the future, one being increased fees to consumers, another being, I believe, national security would be more at risk.    

How would privatizing airports lead to increased fees? If anything, I would think that increased efficiency would lead to lower costs for consumers.

While I am not a fan of the TSA, I would assume that it would still be mandated for private airports.

[Poirot]

Just wanted to give the assembly a link about airport privatization and Canada if some of you are interested in this. Airports are run by not for profit airport authorities, so it's another owner model. It has resulted in high airport fees though.

http://aci-na.org/sites/default/files/session5--privatization--gagnon.pdf

[Lincoln Republican]

I am opposed to privatizing airports.

There are several services which are better handled by the public sector, and airports are one of them.

I fear privatization of airports would lead to increased problems in the future, one being increased fees to consumers, another being, I believe, national security would be more at risk.    

How would privatizing airports lead to increased fees? If anything, I would think that increased efficiency would lead to lower costs for consumers.

While I am not a fan of the TSA, I would assume that it would still be mandated for private airports.

There are several references to how and why this would happen, Poirot's entry being but one.

I might also add that the government of India was advised that airport privatization would lead to higher air fares. 

[Deus Naturae]

I am opposed to privatizing airports.

There are several services which are better handled by the public sector, and airports are one of them.

I fear privatization of airports would lead to increased problems in the future, one being increased fees to consumers, another being, I believe, national security would be more at risk.    

How would privatizing airports lead to increased fees? If anything, I would think that increased efficiency would lead to lower costs for consumers.

While I am not a fan of the TSA, I would assume that it would still be mandated for private airports.

There are several references to how and why this would happen, Poirot's entry being but one.

I might also add that the government of India was advised that airport privatization would lead to higher air fares.  

The Canadian model is not the same as what I am advocating. Canadian airports are run by government-leased, not-for-profit firms. They have no shareholders; all profits are reinvested into the corporation. Like with public airports, there is no profit incentive to drive competition and push firms to increase efficiency. Conversely, private airports attempt to maximize profits, causing them to cut out waste, and offer competitive prices, customer services, etc.

[Earthling]

I am opposed to privatizing airports.

There are several services which are better handled by the public sector, and airports are one of them.

I fear privatization of airports would lead to increased problems in the future, one being increased fees to consumers, another being, I believe, national security would be more at risk.   

Agreed. Smaller airports may be privately owned, but the big airports are better of in public hands. Security, services and regulations are too important to be handled by private enterprise. After all, they only look at making the most profit.

[sentinel]

I'm ultimately undecided on whether I would sign a bill such a this, and am enjoying the Assembly's debate on the issue. I'd just like to add that the regional government already has the power to sell its assets.

[Deus Naturae]

I am opposed to privatizing airports.

There are several services which are better handled by the public sector, and airports are one of them.

I fear privatization of airports would lead to increased problems in the future, one being increased fees to consumers, another being, I believe, national security would be more at risk.   

Agreed. Smaller airports may be privately owned, but the big airports are better of in public hands. Security, services and regulations are too important to be handled by private enterprise. After all, they only look at making the most profit.

I'm fine with letting the government continue to handle security. We can just mandate that private airports cooperate with the TSA.

Why shouldn't private enterprises handle services? Private companies are actually accountable to customers; they need to provide better services or else they will lose patrons. The government is accountable to no one; they will receive funding regardless of whether they turn a profit. Additionally, evidence demonstrates that privatizing airports leads to better quality services (see my first post in this topic).

Which regulations are you referring to?

[Earthling]

There also enough evidence that private enterprise does not result in better quality, just higher costs for clients. Big companies ultimately get the same problems as governments do. They become bureaucratic entities. And clients going to a different business is possible in many sectors, but with airports it's much more difficult. Competition is not great in the airport industry.

And governments are accountable to the people. But a public-owned airport does not have shareholders looking over the shoulders to see of the profits are high enough.

When it comes to regulations, I am talking about how many planes can land on the airport, how many planes can take off, how many passengers can pass through, which airlines can use the airport. Things like that.

[Deus Naturae]

There also enough evidence that private enterprise does not result in better quality, just higher costs for clients. Big companies ultimately get the same problems as governments do. They become bureaucratic entities. And clients going to a different business is possible in many sectors, but with airports it's much more difficult. Competition is not great in the airport industry.

Where has airport privatization resulted in higher costs and worse services? Also, competition may not be as intense as in other industries, but certainly it will be more competitive than it was under a government monopoly. Also, companies are less likely to become bureaucratic because they actually have an incentive to increase efficiency.

You must be logged in to read this quote.

How are governments accountable to the people for airport inefficiencies? I don't think many people base their votes on the quality of airport services. Also, the lack of accountability to shareholders is precisely the problem. With a profit incentive in place, airport managers have much more incentive to cut out waste, offer competitive rates and services, and expand when profitable (this is explained in greater detail the Reason Foundation study I provided).

You must be logged in to read this quote.

Under this law, air traffic control would still be controlled by the government. Air traffic controllers would still be public employees, they would simply go to work at privately owned control towers.

[Earthling]

There also enough evidence that private enterprise does not result in better quality, just higher costs for clients. Big companies ultimately get the same problems as governments do. They become bureaucratic entities. And clients going to a different business is possible in many sectors, but with airports it's much more difficult. Competition is not great in the airport industry.

Where has airport privatization resulted in higher costs and worse services? Also, competition may not be as intense as in other industries, but certainly it will be more competitive than it was under a government monopoly. Also, companies are less likely to become bureaucratic because they actually have an incentive to increase efficiency.

First, a company could own several airports in the area, making competition disappear as well. Monopolies are created among companies as well. There is a long history of companies making deals with eachother so they can screw the people. And I have no doubt that many people within a public-owned airport want to make it as efficient as possible. To bad, it does not always work that way. In public and private owned enterprises.

You must be logged in to read this quote.

How are governments accountable to the people for airport inefficiencies? I don't think many people base their votes on the quality of airport services. Also, the lack of accountability to shareholders is precisely the problem. With a profit incentive in place, airport managers have much more incentive to cut out waste, offer competitive rates and services, and expand when profitable (this is explained in greater detail the Reason Foundation study I provided).
[/quote]

No, not many people vote on the quality of airport services. But at least they have a vote on them. With private-owned airports they don't. And yes, they could go to another airport. Which may be 200 miles away. And also owned by the same company.
And profit incentives does not make better companies. It could come at the cost of workers and clients. Because when things go south, they will pay the price.
What you are writing always sounds nice in theory, too bad that it doesn't work that way in many areas. The airport business is too small to make for efficient competition. And the risks of being dubbed by the companies are too big.

You must be logged in to read this quote.

Under this law, air traffic control would still be controlled by the government. Air traffic controllers would still be public employees, they would simply go to work at privately owned control towers.
[/quote]

And what is to say that they won't increase the number of airplanes arriving and departing the airport? Adding a additional runway can be done, safe or not? After all, increasing the number of airplanes and passengers at the airport is increasing incomes. But other areas like safety and the environment will suffer.

[Deus Naturae]

There also enough evidence that private enterprise does not result in better quality, just higher costs for clients. Big companies ultimately get the same problems as governments do. They become bureaucratic entities. And clients going to a different business is possible in many sectors, but with airports it's much more difficult. Competition is not great in the airport industry.

Where has airport privatization resulted in higher costs and worse services? Also, competition may not be as intense as in other industries, but certainly it will be more competitive than it was under a government monopoly. Also, companies are less likely to become bureaucratic because they actually have an incentive to increase efficiency.

First, a company could own several airports in the area, making competition disappear as well. Monopolies are created among companies as well. There is a long history of companies making deals with each other so they can screw the people. And I have no doubt that many people within a public-owned airport want to make it as efficient as possible. To bad, it does not always work that way. In public and private owned enterprises.

First off, price fixing is illegal, so fears of multiple companies conspiring against consumers are unwarranted. Also, if a single company were able to establish a monopoly in one area (which I doubt would occur often) I don't see how that would be any different that the current government monopoly. If competition were to completely disappear in one area, we'd be in the same situation we're now, except at least then airports wouldn't have to be funded with taxpayer money.

Your last statement is true, inefficiency exists in public and private companies. However, private airports would still be more likely to increase efficiency, as I've already explained. In addition, we've also seen the results I am predicted occur following airport privatizations in real life.

You must be logged in to read this quote.

How are governments accountable to the people for airport inefficiencies? I don't think many people base their votes on the quality of airport services. Also, the lack of accountability to shareholders is precisely the problem. With a profit incentive in place, airport managers have much more incentive to cut out waste, offer competitive rates and services, and expand when profitable (this is explained in greater detail the Reason Foundation study I provided).
[/quote]

No, not many people vote on the quality of airport services. But at least they have a vote on them. With private-owned airports they don't. And yes, they could go to another airport. Which may be 200 miles away. And also owned by the same company.
And profit incentives does not make better companies. It could come at the cost of workers and clients. Because when things go south, they will pay the price.
What you are writing always sounds nice in theory, too bad that it doesn't work that way in many areas. The airport business is too small to make for efficient competition. And the risks of being dubbed by the companies are too big.
[/quote]
Again, I'm not sure what makes you think there will be so many monopolies. If you want, we could insert a clause requiring the regional government to ensure that airports in close proximity to on another are sold to different companies.

Also, what do you mean "profit incentives do not make better companies?" The desire to profit is what drives companies to compete, innovate, and improve. That's a basic tenet of economics. Under that line reasoning, all companies might as well be owned by the government.

You must be logged in to read this quote.

Under this law, air traffic control would still be controlled by the government. Air traffic controllers would still be public employees, they would simply go to work at privately owned control towers.
[/quote]

You must be logged in to read this quote.

Again, air traffic control would still be controlled by the government. The Department of Transportation would still have control over the things you mention.

I don't see your point about additional runways. All safety regulations still apply to private airports.

[Earthling]

I don't think we will agree on things.

But sadly enough price fixings happens to often. And when there aren't too many companies in competition with eachother, the risks are too great.

Also, cutting spending is risky. Because, what is waste? Sometimes it is obvious, but not always.


And adding a runway? An airport sometimes also owns the lands surrounding the airport. So they could ad a new runway on these lands to make additional flights possible. Of course the government will be involved, but outside the safety issues, can they object? When civilians in the area are subjected to far more airtravel, or the environment is in danger?

But like I said, I don't think we will agree. And I don't have the time to discuss this, right now. Maybe tomorrow, but not now.

[Poirot]

The Canadian model is not the same as what I am advocating. Canadian airports are run by government-leased, not-for-profit firms. They have no shareholders; all profits are reinvested into the corporation. Like with public airports, there is no profit incentive to drive competition and push firms to increase efficiency. Conversely, private airports attempt to maximize profits, causing them to cut out waste, and offer competitive prices, customer services, etc.

I hope I did not confuse people with the Canadian model. I just wanted to give an example for those interested in different ownership model. The first part of the link was about world airports and I don't know if it applies to Atlasia but they wrote: Somewhat curiously, in the United States, a bastion of free enterprise, the big airports are still largely publicly-owned.