I would suspect efficiency and capacity expansion to be the most important.
Hello Allessandro, this is not such an easy question. It think, it depends on the objectives and policy of the government regarding the privatization of public goods.
However, two main criteria could be "profitability" and "level of demand". If an airport is publicly managed and earns profits, why would a government want to sell it, except the expansion and maintenance is very costly?
It is much harder for a government to sell a loss-making airport, which needs to be subsidized. Such an unprofitable airport, as you said, should have at least the potential to grow, given the right mix of investments into airport capacity and efficient operations, and to make profits in the mid- to long-term. A demand of one to two million passengers per year is the observed minimum size of an airport to break-even.
Furthermore, an investor would request freedom in his operations, for example with regard to setting charges, unrestricted airspace use or night curfews. Is a government willing to give these freedoms?
We have observed that overstaffing is a problem at public airports. Labor cost usually have the largest share of total costs. Where a public firm would have social obligations and be very inflexible with regard to staff, a private company would "hire-and-fire" its employees, depending on the fluctuation of business (e.g. profits, demand, costs or revenues etc.) over time. So a government might want to privatize an airport just to circumvent the decision to lay off unneeded airport staff itself.
There are also cases where an airport is privatized, but the state remains a large or largest stakeholder and politicians are on the supervisory boards. This is often the case in Germany. Here privatization brings very little, if any, benefit.
In conclusion, there are many citeria possible, but these might be different from case-to-case. Some airports, e.g. Lyon and Nice in France, currently undergo the process of privatization. These may be interesting to look at.
Thank you Branko! Excelent reasoning. Its is great to know a bit more about the German experience. Thanks a lot!
Under privatization, you mean given under a long-term concession for private foreign or domestic management? Perhaps you can get feasibility studies of those projects from actual cases (e.g. Zagreb Airport under French management) to identify main criteria in section both option or 'privatization" and partners. Quality of overall governance in a country is also in the background of these decisions, as well as other non-economic factors.
Privatization of airports is generally done in other countries to allow airports access to private financial markets to facilitate the massive amounts of capital needed for airport infrastructure development projects...and to reduce, if not eliminate the drain airports have on the public expenses so that those monies can be used to address other public concerns.
My dear colleagues, it is a pleasure to let you know that we have just published 2 papers related to the raised question. All your answers were extremelly helpful. The papers are available at the attached links, with the corresponding acknowledgments. Thank you!!
Article Two-sided platforms in airport privatization
Article Estimating the impact of airport privatization on airline de...
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