IATA cautions Nigeria, others over airport privatisation, concession

The International Air Transport Association (IATA) yesterday cautioned Nigeria and other countries on the verge of either privatising or concessioning airport infrastructure to be wary of models that prioritise financial gains.

IATA, the clearing house for over 290 international airlines around the world, urged governments to take a cautious approach when considering airport privatisation especially, as several of such recent initiatives only succeeded in transferring additional cost to air travellers and airlines.

The airlines, at the end of the 74th Annual General Meeting (AGM) in Sydney yesterday, unanimously passed a resolution, calling on governments to prioritise the long-term economic and social benefits delivered by an effective airport ahead of the short-term financial gains provided by a poorly thought-out privatisation.

The Federal Government in the bid to transfer the burden of financing airport infrastructure has resolved to concession the airports nationwide, beginning with the big four in Lagos, Abuja, Port Harcourt and Kano.

IATA’s Director General and Chief Executive Officer (CEO), Alexandre de Juniac, noted that the financial constraint is not peculiar to Nigeria, as the global industry at large is currently in an infrastructure crisis.

de Juniac said: “Cash-strapped governments are looking to the private sector to help develop much needed airport capacity. But it is wrong to assume that the private sector has all the answers.

“Airlines have not yet experienced an airport privatisation that has fully lived up to its promised benefits over the long term. Airports are critical infrastructure. It is important that governments take a long-term view focusing on solutions that will deliver the best economic and social benefits. Selling airport assets for a short-term cash injection to the treasury is a mistake,” he said.

According to IATA, about 14 per cent of airports globally currently have some level of privatisation. As they tend to be large hubs, they handle about 40 per cent of global traffic.

“So, we don’t accept that airport privatisation must lead to higher costs. Airports have significant market power. Effective regulation is critical to avoiding its abuse, particularly when run for profit by private sector interests,” said de Juniac who also noted that five of the top six passenger ranked airports by Skytrax are in public hands.

IATA member airlines resolved to urge governments considering airport privatisation to focus on the long-term economic and social benefits of an effective airport; learn from our positive experiences with corporatisation, new financing models, and alternative ways of tapping private sector participation; make informed decisions on ownership and operating models to best protect consumer interests, and lock-in the benefits of competitive airport infrastructure with rigorous regulation.de Junaic said further: “There is no one-size-fits-all solution. A broad range of ownership operating models exist that can meet a government’s strategic objectives without a transfer of control or ownership to the private sector. Globally, many of the most successful airports are operated as corporatised entities of governments.

“Governments need to evaluate the pros and cons of different models taking into account interests of all stakeholders, including airlines and customers. The most important thing is that airports meet the needs of customers and airport infrastructure users, at a fair price. And to do that, user consultation must be an integral part of the consideration process,” he said.

Recognising that when airport privatisation or concession is pursued, a key determinant of success is the effective balance of the interests of consumers, airlines, investors, citizens and economies.

IATA’s member airlines, therefore, called on governments to protect consumer interests by establishing robust regulatory safeguards to ensure cost efficiency in charges and improvements in investments and service levels.

Also, there are expectations for performance improvement to be set in consultation with airport users and the consumers, while periodic monitoring of airport privatisation through public consultation, with corrective action taken to ensure benefits are realized for the passengers, for airlines and for cargo consumers.