AIRPORT INFRASTRUCTURE SAMPLE PAPER 2019
Should airports be run as commercially oriented profitable concerns or should they be thought of as public utilities with public service utilization?
The main purpose is inquiring whether airports should be able to get back the expenses they accrue from the charges they levy on their passengers or they should just provide good levels of services to their passengers whether or not costs are covered by the revenues generated.
The basis of adopting the later objective would be that the beneficiaries of an airport services are not only the direct users but also the community. In other words, it could be argued that the external benefits from an airport in a particular area more than cover any internal costs.
Most governments still cling to the latter view of airports as public utilities as do the airlines and the international Air transport association when arguing against increases against airport charges.
Whatever policy one adopts in response to the first question one must also face up to the second question which is
- How should one improve airports economic efficiency and reduce or eliminate losses where they occur
To improve economic efficiency airports must first be able to identify the significant areas in which they can capitalize on to improve and how to improve.
Airports should provide good public service to its travelling passengers and at the same time minimize the costs of providing such services to the taxpayer.
One of the major ways in which airports can reduce or eliminate losses is by minimizing or reducing flight delays. Flight delays often force most of the airports to have to pay their customers any losses or cater for their expenses in cases of connecting passengers.
Another way of improving economic efficiency is to by treating passengers differently by offering different services so that a passenger can be able to foot the bills of whatever he/she can afford. This is so because passengers at the airport comprise people from different segments. Thus it is important to understand your passengers from what they want, their attitude towards pricing, the brand they like etc.
Airports can also hire contractors to help them run their affairs through privatization.
- Whether any profits from larger airports should be met out of local or national tax revenues?
The idea here is whether profits from airports in a country that make profits be used to subsidize other airports from the same country that are making losses or should they be subsidized from the funds from the government coffers (Should airports within the same geographical region i.e. Country be treated as one entity or each should be treated as its own entity).
Such decisions solely lies on the government of the given country. But the decisions the government makes with regards to this great affects the pricing and commercial activities of each airport within its territorial boundaries.
Most governments may prefer a system wide approach where in privatizing airports, one service provide is awarded the contract to run several airports in the country individually so that it doesn’t turn out as if they are in competition.
- Should airports be privatized, made an authority or remain under Govt. supervision?
In my view, airports should be privatized. This means that some or all of the services delivery are given to private sector providers.
Privatization if properly implemented would improve the lives of passengers as it would increase efficiency in service delivery, offer better quality, it improve risk management by offering great innovations, better quality, expertise.
- Cost Savings
Recent studies have found out that airport privatization have found cost savings range between 20% to 50%.
2. Better Quality
The best service providers from the interested providers will be awarded the contract to operate the airport as a private facility. Since they will want to renew the contract as agreed, they will strive to provide the best quality or else they will lose out when renewal time arrives
3. Improved Risk Management
When the affairs of an airport are contracted to service providers, they are basically responsible to anything that happens at the airport therefore the government does not have to incur extra costs caused by eventualities e.g. strikes, delays or other risks.
Competition to ensure the service providers retain the awarded contract to run the airports as private institutions will ensure that they come up with innovative products and cutting edge solutions to existing problems.
5. Meeting Peak Demand
Privatization allows the service provider to attain additional help of workers during the peak hours of international travels during a year so that services are uninterrupted to travelling passengers.