07 December 2009

The Sky(way) Is Falling!

The local Ports Authority announces it is petitioning the Federal Aviation Administration (FAA) to privatize the Luis Muñoz Marín International Airport, Our most important airfield. And of course, in their "Pollito Chiquito" way, the birdbrains are crying "The sky is falling!"

They do this because they equate privatization with dismemberment, whereas privatization is, in fact, more like surgery: it can be very beneficial or deadly and the difference is expertise and planning.

First of all, privatization of airports is not new, except in the U.S. of part of A. Over 100 airports in Europe and an almost equal number in Asia and Oceania have been privatized since the 1980s and yes, results have been mixed. But overall, as evidenced by several independent studies, privatized airports are better run that public airports, especially in terms of structural elements (runways, terminals, concourses, services.) And what does Our airport need badly? Structural improvements, especially in the concourses and cargo/repair areas.

According to an empirical study of European airports by the Robert Schulman Centre for Advanced Studies titled Privatization, Regulation and Airport Pricing, unregulated privatized airports tend to charge higher fees that public or regulated airports, but competition and the need to provide adequate passenger services (specifically, airlines) tends to provide a regulatory power to keep prices in check.

The study also says that airports lacking transportation competition (rail, bus, ships) and islands are particularly prone to higher pricing issues. 

Crikey! The sky is falling! The! Sky! Is! Falling!

But the study notes that the reliance of per-passenger fees which airlines bring and take from the airport means that airlines have a fairly strong bargaining position vis á vis the airports. And in Our case, American Airlines and American Eagle have a very strong bargaining position to help check airport pricing.

Analyzing airport privatization around the world, the International Air Transport Association (IATA) issued a Summary Report outlining 10 key lessons concerning airport privatization: Among them:

--Successful privatization involves customers from the outset.

--Independent and robust economic regulation (the government's "monitoring" role, as I have said before and often) is of high importance, but government royalties cannot be too high.

--The most successful economic regulation happens when there's an independent Competition Commission, including businesses and customers, to oversee pricing and related issues.

--Service-level agreements and progress standards must be clear and in place to ensure privatization makes the required improvements to remain competitive.

(Should I point out that the IATA was founded in Havana? The sky is falling!) 

Instead of crying out like a boricua version of a stupid chicken or burying Our heads in the sand like a mythical ostrich, We can take part in this privatization effort not because We can, but because it is vital to Our economic well-being. If the FAA grants the opportunity for privatization, it behooves Us to make the government engage in a privatization process that follows proven success methods and successful models, instead of engaging in its usual "screw the pooch" greed.

It's time We grew up and stopped "The sky is falling!" hysteria and replaced it with "The sky's the limit" vision.

The Jenius Has Spoken.

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