1. INTERNATIONAL CIVIL AVIATION ORGANIZATION*
07/16/96
INTERNATIONAL CIVIL AVIATION ORGANIZATION
11/21/2018 *

2. * Airport´s Privatization and the Quality of the Services
07/16/96
Seminar on “Airport Management: Security and Quality, Balanced Commitments” (La Antigua, Guatemala, October 2002)
Airport´s Privatization and the Quality of the Services
Zenon J. Cortes
FO/FAM
TCB, ICAO
Montreal
11/21/2018 *

3. Sources
ICAO Circular 284, AT/120:
Privatization in the Provision of Airports and Air Navigation Services
(March 2002)
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4. Introduction
In various parts of the world taking place changes in ownership and management in the provision of airports and air navigation services.
ICAO provides analysis on the options available with its possible implications.
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5. Summary Airports and Air Navigation Services: Monopoly characteristics
Description of terms
Development in ownwership and management
ICAO Policies and Guidance
Ownership and management options
Preparing for change on ownership: Regulatory aspects
Selection of a private provider
Privatization vs Quality
Conclusions
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6. Airports and Air Navigation Services: Monopoly Characteristics
Airports start change on ownership in 1970
Most Air Navigation Services no change
Both services are monopolies
ICAO Policy: Does not recommend one organizational format over another, but, in view the worldwide experience, recommends that States establish autonomous authorities where this is in the best interest of providers and users
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7. Description of Terms Privatization: Full or majority ownership
Private participation: Contract, lease or minority participation in equity
Corporatization: Legal entity outside the government
Autonomy: Utilizing revenues originated from the operation and takes independent decisions
Commercialization: Approach in which business principles are applied on developing commercial activities
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8. Development in ownership and management
Growth of Air Transport
Changes in airports infrastructure
Advantages of Autonomous Authorities:
Financial and Operational autonomy
Encouraged a Business culture
Lowered expenses per trafic unit
Recycled aviation user charges into aviation
Reduced Government´s finacial support
Improved the quality of Services, and
Established a clear distinction between Regulator and Operator
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9. Motivation for Private Participation and Privatization
Financial problems
Source of Revenue
Commercial entities
Emergence of Global Airport Management Industry
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10. World experiences
Gradual changes from private participation into Privatization
Forms of Private participation:
Management contract
Lease
Transfer of minority ownership
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11. Pricing Regulation
There is not formulae for price regulation perfect, (ICAO recommends Doc. 9082)
It is necessary a transparent cost data
Regulatory Authorities should ensure that monopoly power is not abused
Use of revenues should return to aviation activities
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12. ICAO Policies and Guidance
The States remain the responsibility even private entities provide services, (Article 28 of the Convention of Chicago)
Freedom of aircraft to use the facilities and non-discrimination charges, (Articles 11 and 15)
Securing the highest degree of unifomity in regulations, standards, procedures and organization, (Article 37)
Reporting od finacial and traffic data, (Articles 54 and 67)
Guidance on charges for airport services, (Doc. 9082)
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13. Ownership and Management Options
Government ownership: Public interest rather than profit
Management contract: airports with limited development requirements and need operational and management improvement
Lease: transfer management and development to a private entity for a fixed period
Transfer of minority ownership: ownership is partially transfered to the private sector
Private sector ownership and control: Majority/full ownership is transfered to a private entity, including non-profit corporations or trusts
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14. Preparing for change in ownership and management
Planning: a change of ownership/management may not solve all the problems of airports and could be facing adversses effects in the long term if poorly planned
Consultation: existing airport management should be involved and user should also be consulted
Study of financial and managerial situation: forescat of air traffic for at least 10 years, tarif structure and new sources of revenues
Selection: would be taken place with caution and in stages
Residual Facilities: It is essential considering the social and economic benefits derived from the operation of non-profit airports
Utilization of revenue: cover deficits from other airports or services
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15. Changes to the legal framework
The transfer of ownership or management of airports to the private sector
A system of management of remaining airports and other services
Non-discrimination in access to facilities and services
Safeguards against abuse of monopoly power
Uniformity of standars, procedures and organizations
Reporting requirements
Security and Safety requirementes
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16. Independent Mechanism for Oversight
Establish independent mechanism to oversee the economic, commercial and financial practices of airports (Doc 9082, paragraph 15)
Ensuring non-discrimination in the aplication of charges
Ensuring there is no overcharging or other anti-competitive practices or abuse of dominat position
Ensuring transparency to determine the basis for charges
Assessing and encouraging efficiency and efficacy on the services provided
Establishing and reviewing standards, quality and level of services provided
Monitoring and encouraging investments to meet future demand
Ensuring user views are adequately taken into account
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17. Other Regulatory Aspects
Strengthening of regulatory organization
Monopoly power is not misused
Quality Control
Statistical Data
Dispute Settlement
Balancing the interests of stakeholders
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18. Human Resource Issues Impact of the personnel currently employed
Increase the training requirements
Quality of Services comply the legal requirements
Impact on local training institutions
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19. Selection of a private provider
Requirements of the bidding process
Transparency
Shorlisting of Bidders
Contract documentation
Expert Advice
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20. Risks of States The leasing company may become insolvent
The private provider may ignore Safety and Security requirements
A provider may ignore the developmental needs of airports
The rpivate provider may not honour the lease payments
The private provider may pressure to negotiate the terms of lease
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21. Privatization vs Quality
The new airport´s ownership and management changed the quality of services ?
It is necessary the privatization ?
What advantages do you realice in your privatization process ?
What risks did you find ?
Let see some examples
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22. Conclusions
The primary objetive of airport services is to provide safe, secure, effcient and economical services to aircraft operators, passengers, shippers and other users
There are several ownership and management options for the provision of these services
A State should choose the option that is best suited for achieving this objetive after careful consideration and planning
Regardless of the organizational structure or the legal status, the State remains ultimately responsible for Safety and Security
The State should consider implementing an oversight mechanism to monitor the monopolistic tendencies, to mesure performance and productivity and to ensure compliance with fair and equitable cost-recovery as well as with ICAO policies and principles
11/21/2018

23. INTERNATIONAL CIVIL AVIATION ORGANIZATION*
07/16/96
INTERNATIONAL CIVIL AVIATION ORGANIZATION
THANK YOU
FOR YOUR
ATTENTION
11/21/2018 *