Sale, Leasing of Airports Under Study : Privatization: While the city of Los Angeles looks into selling its four facilities, the county may lease its five to an outside operator. Both plans have financial merit, officials say.
FOR SALE: 4 airports. Estblshd busnss wth pstve cash flow. Sky’s limit on xpansn. Sbmt offrs to LA Dept. of Airports.
If a rush toward privatization of airports now under way continues, such an advertisement might someday be a reality.
Seeking to raise money, the Los Angeles Department of Airports and its counterparts in New York, Atlanta, Philadelphia, Albany, N. Y., and other cities are considering putting their airports on the auction block.
In Los Angeles, the idea of selling the city’s quartet of airports--Los Angeles International, Van Nuys, Ontario and Palmdale--has been under study for more than a year.
Los Angeles airport officials say they think that such a sale, which would have to be approved by the mayor and City Council, would give taxpayers a one-time windfall of $1.5 billion to $2 billion and additional millions annually in property taxes and investment interest.
“Selling an airport is a simple idea. It’s like taking the equity out of your house,” said Clifton A. Moore, executive director of the Los Angeles Department of Airports and one who sees “some merit” in privatizing airports.
“Airports like LAX are tremendous assets,” Moore said. “But the city has never gotten a penny back on its investment. This could be the opportunity.”
The Los Angeles County Board of Supervisors is ahead of the pack in pursuing airport privatization, although it is seeking to implement a less radical version of the concept.
The board is scheduled to vote Jan. 22 on a plan to lease county-owned Whiteman Airport in Pacoima and four other general aviation fields to a private firm, which would operate the airports in return for the right to keep any profits of more than $2.8 million a year.
The county Department of Public Works estimates that it has been earning about $2.2 million a year from the airports’ operations.
Besides Whiteman, the fields are Gen. William J. Fox Airfield in Lancaster, El Monte Airport, Brackett Field in La Verne and Compton Airport.
Although supervisors last week postponed action for two weeks on the proposed 20-year contract with Comarco Inc., a majority of the board expressed support for the leasing plan despite opposition from pilots and county employee unions.
By most accounts, the idea of selling airports was pioneered by the Thatcher administration in Great Britain. In 1987, the British government sold Heathrow, Gatwick and six other airports to private investors for $2 billion.
That sale spawned a flurry of proposals to sell airports, grant franchises to private firms to build airports or to expand existing ones or, as the supervisors seem prepared to do, lease airports to for-profit operators.
Another strategy, which some say does not qualify as privatization, is to hire a private firm to operate an airport for a fixed fee.
The largest airport operated privately in the United States is Burbank Airport, which since 1978 has been run by a subsidiary of Lockheed Corp.
In addition to the more than one dozen American cities considering selling their airports, the governments of Turkey, the Netherlands, Canada, New Zealand and Denmark are discussing privatization, according to officials of the Santa Monica-based Reason Foundation, a conservative think tank.
The goal in each case is to turn assets into cash that can subsidize other government services. And advocates say the public would be protected from monopolistic pricing by government regulation, the same way that a public utility is regulated.
But this rush to cash in could run afoul of the Federal Aviation Administration, which blocked the only privatization plan presented to it in recent history--the 1988 proposal by the city of Albany, N. Y., to sell its airport or lease it to a private firm. The FAA is working to formulate a national policy on the issue.
Opposition has also come from some airlines, which fear that landing fees would have to be raised to allow the private owners to make a profit. However, executives of several smaller airlines say they welcome privatization because they say it could make available much-needed boarding gates and runways.
The 300,000-member Aircraft Owners and Pilots Assn., which represents many of the nation’s private pilots, remains strongly opposed to privatization, convinced that fees pilots pay would go up at privately owned airports.
Moore said that if $1.5 billion from a sale were invested, it would yield $150 million annually. “That could be used to support social programs that need cash,” he said.
In addition to the one-time cash windfall, proponents say, the sale of an airport returns the property to tax rolls. Advocates also predict that private owners of airports would, in the pursuit of greater profits, invest money in expanding terminal and runway capacity at a faster pace than is occurring now.
Under the present system of financing capital projects at airports, airline tickets are taxed 8% and the money is distributed by the FAA for expansion projects at airports throughout the country. Privatization advocates say that the system is cumbersome and that expansion has failed to keep pace with the doubling in air travel that has occurred since the airlines were deregulated in 1978. They blame the system for contributing to the crunch of passengers at many major airports.
By contrast, privatization proponents say, a private airport owner would be loath to pass up profits that could be realized from expanding business by building new terminals, runways and access roads.
“There’s a growing national shortage of airport capacity that can only be cured by increased investment in airports,” said Robert W. Poole Jr., Reason Foundation president. “Turning airports into businesses will attract such investment.”
Under privatization, he said, air travelers will get an “expanded, more competitive air travel system, while local governments retrieve their capital for other pressing needs.”
In the case of the privatization plan pending before Los Angeles County supervisors, opposition comes from pilots who fear that hangar and tie-down rates for their private planes and the costs of other services would skyrocket as Comarco seeks to make its lease payments and also make a profit.
Nearly 700 pilots signed a petition urging that the contract be rejected.
“They’ll have to get their profits out of the users,” said Gus Whisnand, who runs a charter company at Fox Airfield in Lancaster, “and the users aren’t that wealthy.”
In response, county officials note that rental rates for planes must be approved by the supervisors, even if the airports are operated by Comarco. They also argue that Comarco would lose business to nearby airports if it raised rates too dramatically. Raising fuel prices would also drive pilots elsewhere, county officials said.
Public employee union representatives are also fighting the contract because 55 airport workers would lose their status as county employees under the plan.
County employees contend that the workers are not adequately protected by a provision in the proposed contract that requires Comarco to offer a position, at present salary, to anyone who has worked at one of the airports for at least three months.
A new job with a private firm is no substitute for a county post with seniority, regular raises and union representation, union leaders said.
