Airport Privatization:

Issues Related to the Sale or Lease of U.S. Commercial Airports

RCED-97-3: Published: Nov 7, 1996. Publicly Released: Nov 7, 1996.

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Pursuant to a congressional request, GAO reviewed issues relating to airport privatization in the United States, focusing on: (1) the extent of private sector participation at commercial airports in the United States and foreign countries; (2) incentives and barriers to the sale or lease of airports; and (3) the potential implications for major stakeholders, such as the passengers, airlines, and local, state, and federal governments, should airports be sold or leased.

GAO found that: (1) none of the nation's commercial airports has ever been sold to the private sector, and only one has ever been leased, nevertheless, employees of private companies including airlines, concessionaires, and contractors account for 90 percent of all employees at the nation's largest airports; (2) the largest source of capital for airport development is long-term bond debt secured by future airport revenue and subject to the scrutiny of credit rating agencies; (3) in other countries, a majority of airports are owned and operated by their national governments, but 50 countries have sought greater private sector involvement in their airports; (4) several factors, such as providing additional private capital for development, are motivating greater interest in privatization, but legal and economic constraints impede the sale or lease of U.S. airports; (5) although FAA has permitted and even encouraged some limited forms of privatization, it has generally discouraged the sale or lease of an entire airport to a private entity; (6) FAA proposed policy on the use of airport revenue states that FAA will consider privatization proposals on a case-by-case basis and will be flexible in specifying conditions on the use of airport revenue that will protect the public interest and fulfill restrictions on diverting revenue without interfering with privatization, but FAA has not specified these conditions; (7) predicting how various stakeholders might be affected by the sale or lease of airports largely depends on how such privatization might ultimately be implemented; (8) recognizing the barriers to and the opportunity to test the potential benefits of privatization, Congress established an airport privatization pilot program and, as of October 9, 1996, the Secretary of Transportation can exempt up to 5 airports from some legal requirements that impede their sale or lease to private entities; and (9) the pilot program also requires that a sale or lease agreement meet certain conditions, such as requiring that the private owner or lessee maintain airport safety and security at the highest levels.

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