Jshank83
Topic Author
Posts: 2905
Joined: Tue Nov 01, 2016 2:23 pm

Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 1:53 pm

The U.S. Transportation Department said on Monday it has granted preliminary approval to St. Louis to explore putting its city-owned airport under private management.

http://www.reuters.com/article/us-misso ... SKBN17Q0VA


I just wondered what people's thoughts on this are. I really don't know if this is a good or bad thing. It is portrayed as good but I don't know a lot of background on other airports that have had this happen and what the outcome was. I think I have heard it is more common in Europe but obviously things are different their than here. What kind of advantages/disadvantages comes with putting it under private management? It talks about freeing up money but wouldn't the airport then be paying more money to a middleman?

Any thoughts are appreciated. Thanks.
 
User avatar
BobPatterson
Posts: 3416
Joined: Thu Nov 26, 2015 7:18 am

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 6:15 pm

Why start a new thread after posting your item here: viewtopic.php?f=3&t=1352231&p=19496583#p19496583
Facts are fragile things. Treat them with care. Sources are important. Alternative facts do not exist.
 
Jshank83
Topic Author
Posts: 2905
Joined: Tue Nov 01, 2016 2:23 pm

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 6:52 pm

BobPatterson wrote:
Why start a new thread after posting your item here: viewtopic.php?f=3&t=1352231&p=19496583#p19496583


Because not many people talk in the STL thread. I am assuming if an airport doesn't impact you that you don't go to its specific thread very often. I wanted input from a larger base of people that might have some insight on this.

I also thought I would throw in the STL thread also just to make a note in there also. I usually don't make separate threads than inside the specific airport thread but for this I was hoping to get more input than from locals since it seems to be pretty rare in the USA.
 
User avatar
Rajahdhani
Posts: 549
Joined: Wed Sep 28, 2016 3:13 pm

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 7:05 pm

Jshank83 wrote:
What kind of advantages/disadvantages comes with putting it under private management?

It talks about freeing up money but wouldn't the airport then be paying more money to a middleman?


If, as proponents of privatization often tout - it increased reactivity towards market forces (i.e., as a privatized institution - it would allow the entity to better and more accurately focus on customers/airlines/needs of the airport), then I would be in support of it. That said, the entire value hangs on good management - and crucially, their focus. Let's hope for decency in that respect - as STL can, with proper management - easily provide great opportunities to passengers and airlines, if properly marketed.

I would greatly appreciate hearing from those in/around the STL area, and/or those that are familiar with costs, market forces, and profitability in the region. They would better sharpen or focus the discussion.

Jshank83 wrote:
Any thoughts are appreciated. Thanks.


Thank you for sharing this, and in this manner. While I understand that it was also posted in the STL forum, the very nature of the discussion interesting. I can easily see that if this goes well, that it could be a more palatable solution/example for other airports in similar size/situations.
 
User avatar
Channex757
Posts: 2360
Joined: Sat Jun 18, 2016 7:07 am

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 7:10 pm

Jshank83 wrote:
The U.S. Transportation Department said on Monday it has granted preliminary approval to St. Louis to explore putting its city-owned airport under private management.

http://www.reuters.com/article/us-misso ... SKBN17Q0VA


I just wondered what people's thoughts on this are. I really don't know if this is a good or bad thing. It is portrayed as good but I don't know a lot of background on other airports that have had this happen and what the outcome was. I think I have heard it is more common in Europe but obviously things are different their than here. What kind of advantages/disadvantages comes with putting it under private management? It talks about freeing up money but wouldn't the airport then be paying more money to a middleman?

Any thoughts are appreciated. Thanks.

One way of doing it is to set it up as a private company with shareholders, which then frees the company up to borrow on the money markets without needing the local Government to do it. State or City authorities don't want to get into borrowing for big capital projects for political reasons, but a company borrowing to invest is a different thing altogether.

The company then can licence out its management to a third party if they want to do it that way, but by detaching the assets from public control it frees them up to make large financial moves without the political nonsense. It can even bring in outside investors by issuing new share capital. Lots of possibilities open up. An established operator can take over the day to day operations if desired.

The overall point is that by making the asset arms length from State control, it allows freedom to operate and grow that might not be possible under State ownership.
 
MIflyer12
Posts: 5883
Joined: Mon Feb 18, 2013 11:58 pm

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 8:08 pm

Channex757 wrote:
One way of doing it is to set it up as a private company with shareholders, which then frees the company up to borrow on the money markets without needing the local Government to do it. State or City authorities don't want to get into borrowing for big capital projects for political reasons, but a company borrowing to invest is a different thing altogether.

The company then can licence out its management to a third party if they want to do it that way, but by detaching the assets from public control it frees them up to make large financial moves without the political nonsense. It can even bring in outside investors by issuing new share capital. Lots of possibilities open up. An established operator can take over the day to day operations if desired.

The overall point is that by making the asset arms length from State control, it allows freedom to operate and grow that might not be possible under State ownership.


U.S. public borrowing costs are lower than private borrowing costs. That municipal bond earnings are exempt from federal income tax is a significant benefit to borrowers. Check relevant bond yields. Public financing wins.

Government-managed assets are operated as not-for-profit. Private management will insist on a profit margin on top. That is added cost for carriers and passenger users to bear.
 
User avatar
Channex757
Posts: 2360
Joined: Sat Jun 18, 2016 7:07 am

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 8:59 pm

MIflyer12 wrote:
Channex757 wrote:
One way of doing it is to set it up as a private company with shareholders, which then frees the company up to borrow on the money markets without needing the local Government to do it. State or City authorities don't want to get into borrowing for big capital projects for political reasons, but a company borrowing to invest is a different thing altogether.

The company then can licence out its management to a third party if they want to do it that way, but by detaching the assets from public control it frees them up to make large financial moves without the political nonsense. It can even bring in outside investors by issuing new share capital. Lots of possibilities open up. An established operator can take over the day to day operations if desired.

The overall point is that by making the asset arms length from State control, it allows freedom to operate and grow that might not be possible under State ownership.


U.S. public borrowing costs are lower than private borrowing costs. That municipal bond earnings are exempt from federal income tax is a significant benefit to borrowers. Check relevant bond yields. Public financing wins.

Government-managed assets are operated as not-for-profit. Private management will insist on a profit margin on top. That is added cost for carriers and passenger users to bear.

You are missing the point. It isn't the cost of the borrowing, it's the freedom to actually borrow from the money markets and banks. A State might not have the ability to extend borrowing to cover expansion of the airport facility, whereas by reconstituting it as a private company the shackles of having to adhere to public borrowing limits are avoided. Politics plays a big part here; no politician wants to be labelled with the huge debt increases projects like airport expansion would add to the public finances.

Look at the way Gatwick Airport now operates. It doesn't need to get the UK Government to borrow money on its behalf with all the issues that throws up. Manchester Airport became MAPLC and thanks to being able to borrow against its assets is now MAG, one of the biggest airport operators in Britain. MAG also issued extra share capital and with that bought Stansted airport.

It's all about flexibility, not rates.
 
Kilopond
Posts: 469
Joined: Wed Jun 15, 2016 10:08 am

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 9:05 pm

Jshank83 wrote:
[...]I just wondered what people's thoughts on this are. [...]


More often than not, privatising public infrastructure has dramatically failed. There are some very few exceptions like the Japanes railway system.

Checking the facts: many excellent airports like SIN, ZRH or AMS (the latter including JFK T4) are majority state owned but run as if they were priveate entities. Back when the wave of neoliberalism swapped over the Earth, British, Australian, Eastern European etc. airports had been privatised. Interestingly, the vast majority of them is doing OK-ish or better.
 
User avatar
TWA772LR
Posts: 6836
Joined: Thu Nov 17, 2011 6:12 am

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 9:42 pm

Interesting times for STL if this goes through. Would that make it the first privately-owned major airport in the US?
When wasn't America great?


The thoughts and opinions shared under this username are mine and are not influenced by my employer.
 
USAirKid
Posts: 498
Joined: Mon Jun 13, 2016 5:42 am

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 9:57 pm

TWA772LR wrote:
Interesting times for STL if this goes through. Would that make it the first privately-owned major airport in the US?


I'm not sure if Branson Airport counts. It did have Southwest and Frontier service at one point.
 
User avatar
TVNWZ
Posts: 2202
Joined: Fri Feb 17, 2006 9:28 am

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 10:07 pm

Channex757 wrote:
You are missing the point. It isn't the cost of the borrowing, it's the freedom to actually borrow from the money markets and banks. A State might not have the ability to extend borrowing to cover expansion of the airport facility, whereas by reconstituting it as a private company the shackles of having to adhere to public borrowing limits are avoided. Politics plays a big part here; no politician wants to be labelled with the huge debt increases projects like airport expansion would add to the public finances.

Look at the way Gatwick Airport now operates. It doesn't need to get the UK Government to borrow money on its behalf with all the issues that throws up. Manchester Airport became MAPLC and thanks to being able to borrow against its assets is now MAG, one of the biggest airport operators in Britain. MAG also issued extra share capital and with that bought Stansted airport.

It's all about flexibility, not rates.


Actually, it is the point. Higher financing means bigger fees and costs mean higher ticket prices. The flexibility under public ownership at Lambert lead to the new runway fiasco that the airport managed to have the wherewithal to spend a cool Billion dollars on an unneeded runway. It is always about cost. Good or bad.
 
User avatar
Channex757
Posts: 2360
Joined: Sat Jun 18, 2016 7:07 am

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 10:21 pm

TVNWZ wrote:
Channex757 wrote:
You are missing the point. It isn't the cost of the borrowing, it's the freedom to actually borrow from the money markets and banks. A State might not have the ability to extend borrowing to cover expansion of the airport facility, whereas by reconstituting it as a private company the shackles of having to adhere to public borrowing limits are avoided. Politics plays a big part here; no politician wants to be labelled with the huge debt increases projects like airport expansion would add to the public finances.

Look at the way Gatwick Airport now operates. It doesn't need to get the UK Government to borrow money on its behalf with all the issues that throws up. Manchester Airport became MAPLC and thanks to being able to borrow against its assets is now MAG, one of the biggest airport operators in Britain. MAG also issued extra share capital and with that bought Stansted airport.

It's all about flexibility, not rates.


Actually, it is the point. Higher financing means bigger fees and costs mean higher ticket prices. The flexibility under public ownership at Lambert lead to the new runway fiasco that the airport managed to have the wherewithal to spend a cool Billion dollars on an unneeded runway. It is always about cost. Good or bad.

You just aren't getting it.

A public body has to borrow according to their debt limits and existing covenants. In the private sector, an airport can fund its expansion and keep this borrowing off the public balance sheet.

Going to an arms length setup means politics is removed from the equation. No parties attacking each other about debt profligacy. Real management can manage and fund the business using practices that all other privately held businesses use, not the leaden hand of the State and having to scratch around there to finance things.

That degree of freedom is worth the effort of detaching the asset from public ownership. It takes the chains off.
 
GSPSPOT
Posts: 2490
Joined: Thu Sep 11, 2003 1:44 am

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Mon Apr 24, 2017 10:32 pm

I like this idea. As mentioned earlier upthread, this has already been done in other parts of the world, with what sound like good results. Isn't ATC in some countries privatized as well?
Great Lakes, great life.
 
User avatar
atcsundevil
Moderator
Posts: 3593
Joined: Sat Mar 20, 2010 12:22 pm

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Tue Apr 25, 2017 12:23 am

TWA772LR wrote:
Interesting times for STL if this goes through. Would that make it the first privately-owned major airport in the US?

The first privately owned US airport was Stewart International Airport in 2000. It was leased for 99 years by UK-based National Express Group, but was effectively a failure. PANYNJ bought out the remaining 93 years on the lease.

STL would, however, be the first major airport in the US to privatize, should it move forward.
 
mernest
Posts: 15
Joined: Tue Jun 14, 2016 7:51 pm

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Tue Apr 25, 2017 12:42 am

Note that the City of St. Louis is seeking to put the airport under private mangement, not private ownership. Thus, all of the talk about the differing financial prospects of private owners is off-topic.
 
Jshank83
Topic Author
Posts: 2905
Joined: Tue Nov 01, 2016 2:23 pm

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Tue Apr 25, 2017 3:28 am

My concerns are that this is a way for the city to take more money out of the airport and put less back into it. The ex-mayor (he just left office a week ago) talked about how it would free up "lots" more money for other projects (right now it is capped at 6 million). The airport still has a bunch of debt paying off a runway. The airport has been on an upswing the last few years so I don't really know if I want what is working to be messed with. I also do not know how bringing in a 3rd party (that will want a cut of the profits) will magically make more money appear.

I am holding judgement until I see some numbers but I am skeptical that this is going to bring in a bunch more (if any) money to the city. If the airport was doing poorly or it had lots of extra money (that needed routed to the city) then I could get more behind it. In my opinion they need to be using any extra money to pay down debt and lower landing fees.
 
rbavfan
Posts: 3253
Joined: Fri Apr 17, 2015 5:53 am

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Tue Apr 25, 2017 4:20 am

Channex757 wrote:
Jshank83 wrote:
The U.S. Transportation Department said on Monday it has granted preliminary approval to St. Louis to explore putting its city-owned airport under private management.

http://www.reuters.com/article/us-misso ... SKBN17Q0VA


I just wondered what people's thoughts on this are. I really don't know if this is a good or bad thing. It is portrayed as good but I don't know a lot of background on other airports that have had this happen and what the outcome was. I think I have heard it is more common in Europe but obviously things are different their than here. What kind of advantages/disadvantages comes with putting it under private management? It talks about freeing up money but wouldn't the airport then be paying more money to a middleman?

Any thoughts are appreciated. Thanks.

One way of doing it is to set it up as a private company with shareholders, which then frees the company up to borrow on the money markets without needing the local Government to do it. State or City authorities don't want to get into borrowing for big capital projects for political reasons, but a company borrowing to invest is a different thing altogether.

The company then can licence out its management to a third party if they want to do it that way, but by detaching the assets from public control it frees them up to make large financial moves without the political nonsense. It can even bring in outside investors by issuing new share capital. Lots of possibilities open up. An established operator can take over the day to day operations if desired.

The overall point is that by making the asset arms length from State control, it allows freedom to operate and grow that might not be possible under State ownership.


And what happens when they decide to raise prices every quarter so stockholders get dividends & prices for customers and airline shoot up. If an airport is privatized in the US it needs to be a non-profit entity so the stock market swings do not destroy the benefits. You see that to much in the US as Board members & high end employees get stock options & bennies based on if the stock goes up every quarter.
 
oosnowrat
Posts: 175
Joined: Mon Sep 17, 2012 6:55 pm

Re: Preliminary approval to St. Louis to explore putting its airport under private management

Tue Apr 25, 2017 1:44 pm

SJU in San Juan, Puerto Rico, is under private management.

https://www.city-journal.org/html/makin ... 14946.html

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos