Recent Posts

Airports concession: Intl airlines to raise fares, passengers to pay more

Monday, 4 June 2018

There are indications that inbound and outbound passengers may pay more for air travel as charges and taxes are expected to be raised astronomically should the Federal Government go ahead with its planned concession of its major airports.

The International Air Transport Association (IATA) has urged governments including Nigeria not to consider aerodromes for privatisation and concession simply as means to raise cash for governments, stressing that the decision to privatise or not to privatise should always focus on consumer benefits and the wider economy.

The clearing house for over 200 global airlines noted that there is higher risk of abuse of market power from privatised operators in the monopoly airport sector as their action will be focused on shareholders benefits as opposed to consumer and wider economic benefits.

Equally worrisome is allegation that governments have not developed a robust business case which has also led to lack of transparency in the transaction process and often the process is driven by unsolicited proposals, interested private parties or financiers.

IATA Senior Vice President, Airport, Passenger, Cargo and Security, Nick Careen stated these while speaking on failure of airport privatisation across the globe at the 74th IATA Annual General Meeting in Sydney, Australia.

The IATA chief stated that airports are a critical part of national infrastructure, just as he tasked governments to maintain an ownership interest.

“No one size fits all solution to airport ownership but corporatisation where the government maintains its skin in the game-generally provide better outcomes for consumers and the wider economy”.

Buttressing his claim, he stated that five out of the best six airports in the world in the Skytrax ranking are public. He listed the airports as Singapore Changi Airport, Incheon International Airport, Hong Kong International Airport, Hamad International Airport and Munich Airport.

He noted that governments’ focus to generate revenue through airports concessions and privatisation may backfire on economic growth through tourism as many people may shun visits to the country because of high costs and charges that are detrimental to air transport growth.

He categorised Nigeria among countries like France, India, Japan, Saudi Arabia and Pakistan which are at implementation phase of airport concession or privatisation.

Bahrain, Canada, Philippines and the United States are at inception phase while Australia, Brazil, Chile, Greece, New Zealand, Portugal and Senegal are at the post implementation phase.

Minister of State for Aviation, Hadi Sirika had consistently said that that there is not much government could do in terms of investing more funds to develop the airports, as government does not have such funds and there is better alternative to improving the infrastructure through airports concessions.

He listed the airports to be concessioned as Murtala Muhammed International Airport, Lagos, the Nnamdi Azikiwe Airport, Abuja, Port-Harcourt International Airport and the Mallam Aminu Kano International Airport, Kano while others would follow in the next phase.

He was however silent on the impact of it on higher charges but reiterated the need to concession the airports, describing the plan as the only viable option to modernise and make the airports serve travellers better.

Careen stated that governments’ struggle to move quickly and the cash-strapped state of their finances is fuelling a trend of looking to the private sector for solutions, stressing that successful airport privatisation should deliver a more efficient, cheaper and better service for passengers; cost effective and fit for purpose investment, normal returns on capital for investors and the economic benefits for the local community and the wider economy.

His words, “Clearly the generally accepted perceptions of introducing privatisation have not held true in the airport sector. Charges are higher for privatised airport-this is not what we should expect from privatisation in any sector. Our customers or governments would not accept it if airline fares increased during privatisation or concession in our sector”.

“Operating efficiency are not much better for privatised airports contrary to the expectation of introducing private sector practices. But even though efficiency is not better, profits are significantly higher-clearly airport privatisation comes at the price-a price which we and our customers have to pay”.

“Our goal is to explain to aviation stakeholders why privatisation in the monopoly airport sector is not working for the best interests of long-term social-economic benefits and consumers and why this is different from the successes seen in the competitive airline sector”, he added.

He further disclosed that privatised airports have failed to deliver because of lack of competition, ineffective economic regulation, short term financial gains instead of best consumer/public interest, alternative governance solutions not considered, insufficient consultation with industry and lack of transparency in transaction process.

“Governments have not developed a robust business case. There is lack of transparency in the transaction process and often the process is driven by unsolicited proposals, interested private parties or financiers. There is a lack of bidder selection criteria and often the highest bidder is simply selected and/or there are vague or provider-biased concession contract terms.”

Leave your comment.

No comments: