Growth Driving Airport Investment

ICAO Journal – 2016 – Vol.71 No.1 (pages 25-26)

“Financing airport infrastructure is challenging for many States. Developing States in particular face difficulties due to borrowing cost factors which may likely worsen in the near future,” said Dr. Fang Liu, ICAO Secretary General. “ICAO’s ongoing No Country Left Behind programme emphasizes that States be duly assisted and financed in the coming years so that the socio-economic benefits of aviation growth may be shared by all nations and all economies.”

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Dr. Liu was addressing delegates at the Investing in Airports – Economic Oversight and Regulation conference in New Delhi, India, in December. The conference was hosted by Airports Council International (ACI) in cooperation with ICAO.

Angela Gittens, Director General of ACI World, said, “We want to ensure that we have economic oversight and regulation that provide the resources to operate, invest, and produce an equitable rate of return to airports.”

She stated, “Many airports are still subject to haphazard and heavy-handed regulation – regulation that is administratively burdensome and unnecessarily costly. The reason for the reticence heretofore is that much of today’s airport economic regulation is premised on the outdated view of airports as ‘natural monopolies.’”

ACI data tells a different story, Gittens explained. “Consider: competition among airports, both locally and internationally, has increased considerably. Legal frameworks have changed, with privatization and a range of public-private partnership (PPP) models emerging. The commercialization (or corporatization) of not-for-profit airports has also evolved, requiring new sets of roles and responsibilities for management teams, airlines, other tenants and contractors. In the midst of these changes, ICAO and innovative state regulators have understood that their roles need to change as well.”

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ICAO’s Dr. Liu told attendees, “As with any successful investment paradigm, you have to have some skin in the game. This means working with ICAO to ensure effective implementation in States of our civil aviation standards and policies. It requires States to establish concrete business plans for their civil aviation sectors, and to back these up with clear indications of political will. ICAO is also developing new tools and resources to aid you in these efforts.”

The Secretary General reminded, “States remain ultimately responsible for the safety, efficiency, security, and economic oversight of these entities. Privatization does not in any way diminish a State’s requirement to fulfill its international obligations under the Chicago Convention and its Annexes.”

The aviation sector, Dr. Liu noted, “has made great progress and contributed significantly to global prosperity throughout its long history, always as a result of our ability to cooperate across borders and cultures, forge consensus, and achieve practical and sustainable global solutions.” ACI’s Gittens added, “The needs are broad but the top priorities are safety and security, customer service, and economic and environmental sustainability.

“There could be no better venue to engage in these conversations than India, an aviation market that is fast-growing and dynamic, and one in which the government has developed a range of methods to manage, govern, and regulate its airport sector.”

Jérôme Simon, ICAO Senior Officer, Infrastructure Manager, presented at three pre-conference sessions on airport charges, economic oversight, and PPPs. On airport charges, which are addressed in ICAO Doc 9082, Simon reiterated four key principles: non-discrimination, cost-relatedness, transparency, and consultation of users. He told the economic oversight delegates, “The interests of all stakeholders could be best served if users are sufficiently well-informed through a constructive engagement of airports and users.” ICAO guidance is available in the Airport Economics Manual, Doc 9562.

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In the PPP session, Simon outlined the prerequisites for a successful partnership:

Macro factors include political stability, governmental expertise, a favourable policy environment, strong sponsor units, and an effective framework;

Project-specific factors are an adequate scope, adequate competition, and output indicators, together with social and economic factors. ICAO’s Manual on Privatization of Airports and Air Navigation Services is found in Doc 9980.