2 Firms Express Interest in Buying O.C.’s Airport : Transit: Private owner-operators say they’d jump at the chance to take over John Wayne facility--if only it were for sale.
As Orange County mulls selling its modernized John Wayne Airport, the two major private owners and operators of airports worldwide say they would fight for a chance to buy the facility--if it ever is put out to bid.
BAA Plc., which owns London’s Heathrow Airport and six other United Kingdom airports, “would be delighted” to take over Orange County’s airport, said Michael E. Bell, president of its BAA USA subsidiary in Pittsburgh.
And Airport Group International Inc. in Glendale, a joint venture led by Lockheed Martin Corp., said the airport “definitely would be interesting to us,” especially with the prospect of the military’s El Toro airport being thrown into the deal, said Robert Aaronson, the company’s executive vice president.
The county is searching for ways to raise funds to recoup the $1.7-billion securities loss that plunged it into bankruptcy in December and caused losses at 96 other local governments and agencies.
Under one plan outlined Monday, the Orange County Transportation Authority, which is still owed $221 million in the debacle, would take control of John Wayne and El Toro airports for $215 million, but the agency’s details were skimpy and county officials are skeptical.
The BAA and Airport Group executives point out that the county hasn’t put the airport up for bid--and likely won’t be able to do it without changes in federal laws and deed restrictions. A sale, under current laws, wouldn’t help the county because any proceeds beyond debt repayment must be used only on the airport.
The airline companies don’t want John Wayne Airport sold because they see it simply as paper shuffling that will result in new owners raising fees on airlines and passengers to pay for the acquisition.
“We’re not opposed to privatization, but we’ve seen few that benefit the industry,” said Chris Chiames, spokesman for the Airline Transport Assn. of America in Washington. “We’re sorry that OCTA lost money because of the county, but we’re not going to support a plan to sell the airport to OCTA to repay their loss.
“Airlines and shippers that use airports and their customers, can’t end up being the checkbook to bail out mismanagement of public funds and lack of leadership,” Chiames said.
Neither BAA nor Airport Group is pushing the county to act; in fact, they’re staying clear unless asked for advice or bids.
“We’re in a response mode,” Aaronson said.
Noted Bell: “There is no invitation to bid. If there is, then we would respond.”
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But both executives point out that more governments worldwide are putting such public facilities as commercial airports in private hands, either to own or to operate.
“This is clearly an emerging business,” Aaronson said. “We see that other countries are really ahead of this country in that regard.”
BAA itself was formed as a public company in 1987 when then-Prime Minister Margaret Thatcher decided to privatize the airports. The British Airports Authority became BAA and took control of London’s three major airports and four others. The publicly traded company now handles 80% of the air traffic in England and Scotland.
Its U.S. arm is the master developer for food and beverage and retail facilities at Pittsburgh’s airport, bringing the innovative “air mall” with 80 restaurants and shops to the runways.
It is about to sign a 10-year contract to manage the Indianapolis airport and four commuter airfields in that city, and executives have consulted with airport officials at Los Angeles International Airport and in Italy, South Africa and Pacific Rim countries.
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Airport Group is the new name for Lockheed Air Terminal Inc., which took on Soros Capital as a partner in January to help it expand worldwide. Airport Group owns a stake in Toronto’s international Terminal 3 and operates the new facility.
The company also operates airports in Albany and West Point, N.Y., Columbus, Ohio, and Burbank Airport, which it once owned. It operates terminals at various airports, including Atlanta’s, and is working on a project in the Turkmenistan, a former Soviet Union republic.
Both companies are lining up to bid on Australia’s 15 major airports once pending federal legislation there is adopted to allow the sale to private companies.
“Privatization in a lot of other areas is being pushed, including the air traffic control system,” said Lee Howard, president of Airline Economics, an aviation consulting firm. “So I think probably we’re seeing a slow build up of what will be a trend in the industry.”
Howard called BAA and Airport Group the “giants” in private airport ownership and management, but that’s because the field is so new and few airports in this country or others are privately owned. There are competitors, but they are mainly small local or regional operations, the executives said.
Large new groups are forming, though, to bid on Australia’s airports. They include a French operation and several Australian ventures. None, Howard said, has the experience of BAA or Airport Group.
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Privatization efforts usually are mired in the age-old debate of whether the public sector or the private sector can handle a job better, Howard said.
“It’s generally thought that the private company can work more efficiently, but I’m not sure that’s always true,” he said. “But if I had to bet, I’d bet on the private company.”
Indianapolis officials have been asking private companies for bids on everything from pothole repairs to waste-water treatment plants. Sometimes it has gone with private firms, sometimes with its public employees.
The city has agreed to give BAA USA the contract to operate its airport, and the airlines are happy with the pact, according to their trade group.
“Indianapolis is the first plan we like,” Chiames said. “It reduces the costs $2 per passenger and passes out the savings to the airlines and shippers.”
Chiames said privatization can work when there are mutual benefits. More typically, though, the group sees plans that do little more than divert revenue away from airport operations and burden airports with additional loans.
“The fact is that airlines and their customers have paid for most airports,” he said.
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Eyeing John Wayne Airport
Two firms say they would be interested in purchasing John Wayne Airport if the county puts it up for sale. Details on the firms:
BAA PLC. * Headquarters: London * U.S. office: Pittsburgh (moving to Washington later this month * Chief executive: Sir John Egan, former chairman of Jaguar * 1994 revenue: $1.6 billion (U.S.) * 1994 net income: $500 million (U.S.) * Stock: Traded on London, Toronto and Australian stock exchanges * Ownership: Former British Airports Authority, privatized in 1987 * Airports owned: Heathrow, Gatwick, Stansted, Southampton, Edinburgh, Aberdeen and Glasgow (all in U.K.) * Current contracts: Operates the food, beverage and retail enterprises at Pittsburgh Airport * Under negotiation: Indianapolis; Milan, Italy, and 15 Australian airports
AIRPORT GROUP INTERNATIONAL (AGI) * Headquarters: Glendale * Regional offices: Washington, London, Sydney * President: Viggo Butler * Employees: More than 1,300 worldwide * Ownership: Privately held joint venture between Lockheed Martin Corp. and Soros Ltd. * Business: Airport development and management; refueling; maintenance. Owns a stake in Terminal 3 at Toronto’s Pearson International Airport
Source: BAA, Plc.; Airport Group International; Standard & Poor’s; Researched by JANICE L. JONES / Los Angeles Times
