ACRP-Problem-No-10-01-08.pdf

ACRP Problem No. 10-01-08 Recommended: No Private Sector Participation in Public Airports ACRP Staff Appears to be some overlap with problem statement 10-01-12 and could be combined. TRB Aviation Group Aviation Economics & Forecasting Cmte: Do not support - problem statement is weak, vague and a bit marketing oriented. However, the issue of private sector (or outsourced) provisioning of some services on airports may be of interest, and such concerns could be rolled into an expanded problem statement for PN 10-01-12. Panel for Future Finance & Business Strategies Emphasis The Emphasis Area Panel saw similarities with problem statement 10-01-12. The other problem statement was stronger in many ways. Some elements from this problem statement should be added to the other. ACRP Screening Panel Problem statement 10-01-12 also addresses this topic and the screening panel recommends adding the most valuable elements of this scope into 10-01-12 for a single project. Emphasis Area: Future Finance and Business Strategies A AC CR RP P Problem Number Problem Number 10-01-08 I. PROBLEM TITLE Private Sector Participation in Public Airports FY2010 Focus Area Research Results Digest (RRD) 5 Topics: Title Page Airport Privatization 6 Airport Viability During Economic Downturn 6 Human Resource Outsourcing 16 II. RESEARCH PROBLEM STATEMENT Airport operators today face extraordinary challenges. The airport business is becoming increasingly multifaceted, technology is changing, the role of airports as service providers is growing, and operators are striving to deliver more with less. Sometimes called “partial privatization”, U.S. airports are trying to determine if they can achieve a balance between services the private sector can provide at a higher quality and lower cost and services the airports themselves do best. Internationally, private providers are effectively delivering public services alongside government organizations. Private sector delivery of public services is a tool that can be applied to all sizes of airports to deal with limited resources of skilled staff and equipment, and to meet capital investment, operational, maintenance and management requirements of the airport with a higher level of effectiveness. Private sector participation in airports, through ownership, management, or new investment programs, can take many forms, including outright sale of shares or assets, concessions, long-term leases, Public Private Partnerships (P3), contracting out, Design-Build-Finance-Operate, and other Private Finance Initiatives. There is a wide range of innovative options available to airports. However, the relative limited experience in the U.S.especially with private delivery of core functions at airports, makes it hard to draw firm lessons. With the private sector likely having an increasing role in meeting airport needs, there should be a common understanding of the options available, a means to decide among alternatives, and best practices on successful implementations. III. OBJECTIVE We believe this research can provide guidance to help airports develop courses of action that improve the airport businesses and their services. The objective of this research would be two-fold. First, it would be to put forward a framework of ideas for innovation that will deliver greater value and improved services to optimize airport performance using a mix of public and private services. Second, is to then provide initial steps and suggestions for how to begin implementing small steps forward that are relatively easy to implement and can provide near-term benefits to all stakeholders. Information to be incorporated in the research includes: Inventory of Available Private Services for Airports Generally Accepted Definitions of Privatization Examples of Global Airports Operating with Public-Private Mix Lessons Learned with Emphasis on Global Experiences Analysis of Advantages and Disadvantages Characteristics of Successful Implementations Page 1 Emphasis Area: Future Finance and Business Strategies Steps to Begin Exercising Partial Privatization An overview of how to effectively implement private service contracts is envisioned as being beyond the scope of this research project, but it could possibly be a part of a comprehensive series. IV. RESEARCH PROPOSED Interview(s) with U.S. and international airport directors will be conducted along with literature searches on national and global best business practices regarding private delivery of public airport services/partial privatization. The intent of the project would be to fully leverage existing research, best practices, and lessons learned domestically and overseas. V. ESTIMATE OF THE PROBLEM FUNDING AND RESEARCH PERIOD Recommended Funding: $375,000 Research Period: 12 15months VI. URGENCY AND PAYOFF POTENTIAL Urgency Many airports are facing the need for large expenditures of capital resources in the next several years. Airports Council International North America (ACI-NA) estimates airport capital development costs for 2007 through 2011 at $87.4 billion, or an annualized amount of $17.5 billion. It is clear that the next few years are going to bring new challenges as airports face profound questions of how to continue to improve airport services when faced with intense financial and environmental pressures. There is now the stimulus to look more radically at how we can achieve fundamental change in the delivery of airports services to meet expectations. The increased complexity, changing environments and economic challenges to airport operators are continuing, while the role of airports as a service provider is growing. The recent downturn in commercial passenger and cargo activity has had a negative financial impact on airports. When taken together, the growth of complexity and downward trends create a sense of urgency in the airport operating environment. Payoff By identifying and disseminating best practices from top performing airports around the world, airport- industry practitioners can immediately begin taking steps to achieve similar results. This project could assist airport management in making the best decisions on airport finance, operations, maintenance and management. The project will help enable airports to provide effective delivery of public services by, for example, using the optimal mixture of a public and private workforce. VII. RELATED RESEARCH Innovative Finance and Alternative Sources of Revenue for Airports, ACRP Synthesis 1, Project 11-03, Topic S01-01. Other research also exists. Page 2 Emphasis Area: Future Finance and Business Strategies Page 3 VIII. PERSON(S) DEVELOPING THE PROBLEM David P. Hayzlett Vice President, Aviation Account Executive Serco Inc. 1818 Library Street, Suite 1000 Reston, Virginia 20190 Telephone: (703) 939-6596 Facsimile: (703) 939-6001 IX. PROCESS USED TO DEVELOP PROBLEM STATEMENT This submission draws on the practical experience of Serco Group plc - International, the Serco Institute- Global, and Serco, Inc. (North America), who used an informal committee approach for its development. The majority of experience related to delivering public services, innovative finance and privatization are drawn from the United Kingdom, in part because over the past two decades, that country has led the world in the development of public service markets. X. DATE AND SUBMITTED BY April 11, 2009 David P. Hayzlett Vice President, Aviation Account Executive Serco Inc. 1818 Library Street, Suite 1000 Reston, Virginia 20190 Telephone: (703) 939-6596 Facsimile: (703) 939-6001