Sell Irish airports into private hands

Permabear

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andrew

....and the shipping ports while we're at it!

beeftotheheels

Permabear wrote: »

This post had been deleted.

Don't suppose Ferrovial will be in a position to join the list of bidders!

southsiderosie

Is there any data on on-time performance or passenger satisfaction in publicly versus privately managed airports? Having been trapped in the Great Heathrow Holiday Travel Debacle of 2010, I am genuinely curious, especially since IIRC there were a lot of complaints afterwards that privatization in that case led to worse contingency planning because the parent company re-directed revenues from Heathrow to other struggling holdings.

beeftotheheels

southsiderosie wrote: »

Is there any data on on-time performance or passenger satisfaction in publicly versus privately managed airports? Having been trapped in the Great Heathrow Holiday Travel Debacle of 2010, I am genuinely curious, especially since IIRC there were a lot of complaints afterwards that privatization in that case led to worse contingency planning because the parent company re-directed revenues from Heathrow to other struggling holdings.

BAA was a FTSE 100 Plc, Maggie sold it off in '85, bought by a Ferrovial led consortium in 2005.

So public or private ownership couldn't be the issue with Heathrow in 2010. Public Plc vs leveraged subsidiary could be the issue. But not State ownership of Airports.

southsiderosie

beeftotheheels wrote: »

BAA was a FTSE 100 Plc, Maggie sold it off in '85, bought by a Ferrovial led consortium in 2005.

So public or private ownership couldn't be the issue with Heathrow in 2010. Public Plc vs leveraged subsidiary could be the issue. But not State ownership of Airports.

OK maybe this is a point of clarification, but there seem to be different scenarios here:

* state owned, state operated
* state owned, with operation rights auctioned off
* completely private

Which one is Heathrow? Because all I remember of that travel debacle were complaints about the Spanish holding company.

As a more general point, one of the key issues I've seen with privatization, especially of local services, is that even if a city sells off assets, if there are operational or customer service problems, elected officials still get the blame. So if you are damned either way, what is the incentive for local officials to sell: a short-term cash infusion to solve budget problems, but a longer-term political problem that, if you are lucky, can be shuffled off to those who come after you?

beeftotheheels

southsiderosie wrote: »

OK maybe this is a point of clarification, but there seem to be different scenarios here:

* state owned, state operated
* state owned, with operation rights auctioned off
* completely private

Which one is Heathrow? Because all I remember of that travel debacle were complaints about the Spanish holding company.

As a more general point, one of the key issues I've seen with privatization, especially of local services, is that even if a city sells off assets, if there are operational or customer service problems, elected officials still get the blame. So if you are damned either way, what is the incentive for local officials to sell: a short-term cash infusion to solve budget problems, but a longer-term political problem that, if you are lucky, can be shuffled off to those who come after you?

BAA Plc was flogged off by Maggie. Owned the assets, owned the rights for 20 years from '85.

Leveraged take private in 2005 to a consortium headed by Ferrovial (Spanish infra Company) with Singaporean wealth fund and Quebecois public pension fund.

So issue isn't State ownership, it is leveraged buy-outs of infra assets.

Icepick

Who would want them? They can't survive without state subsidies as is. Even Dublin airport is heavily indebted because of terminal 2.

Black Swan

Permabear wrote: »

This post had been deleted.

To what extent is privatization of our airports a simple solution to a complex problem? A comparison of two highly associated problems, although not exhaustive here, may be useful to contribute to the discussion.

“U.S. airports are among the most privatized in the world” (de Neufville, 1999). Such largely privatized airports are heavily dependent upon the airlines for revenue streams, and if those airlines are failing, the airports will be adversely impacted financially and may also fail (ACRP, 2009).

Thus far this leader of airport privatization has been associated with a dismal history of airline bankruptcies, with most American private-sector-for-profit airlines failing and being forced to file for protection. For example, the bankruptcy of United Air Lines Corporation (9 December 2002 at $22.8 billion), and that of Delta Air Lines (14 September 2005 at $21.5 billion), represent the 21st and 22nd largest bankruptcies in history.

If we are to consider a new model for airport organisation in Ireland, does it not demand that we also include in that model the associated airlines? Discussing airports without including airlines, is like discussing a football stadium without football teams; i.e., no teams, no stadium (no airlines, no airport).

Furthermore, merely casting aside one model of airport organization with the claim "A state-owned airport is nothing but an anachronism today" provides no substance that would suggest that a private one would do better.

The private-for-profit status of American airlines corporations did not save them from bankruptcy, so to what extent would the privatization of their highly associated airports reduce the financial risk?

Additional References:

• de Neufville, R. (1999), Technology and Policy Program, Massachusetts Institute of Technology.
• ACRP Legal Research Digest (2009), The Impact of Airline Bankruptcies on Airports, Transportation Research Board, National Academy of Sciences, No 6.

Sleepy

It'd be a brave company that'd buy the Irish airports tbh.

Dublin hasn't enough traffic to run either terminal at 100% capacity. The unions are on the militant end of the spectrum, work practices are very much set in the public sector mindset and salaries and perks are high.

There's potential to turn it around of course but you'd have some major problems on your hands getting rid of the unions first. I'd imagine an "infrastructure only" deal where the current operation could actually be shut down before a new staff took control would actually be a more attractive option to the market (though the logistics of this in an airport would be an utter nightmare).

Nijmegen

Black Swan, your point re: Airlines and bankruptcy speaks to the difficulties of the airline industry, but to my mind what we see is a contraction of the business to scale up the carriers, seek efficiencies and drive traffic to where passengers demand it.

That may mean closing airports in the US, such as regional airports in favour of hubs. At this moment regionals suffer because of pricing and the spoke nature of the hubs operated by major airlines. So folks have to drive further to catch a plane, or get the best ticket price.

I don't see anything wrong in that. If there are too many airports, close some and let the market come to equilibrium.

In Ireland however I don't see that we are (today) over subscribed with a glut of airports. We have seen a contraction in regional airports, but that is to be expected given the market conditions. I don't see us losing Dublin, or even Cork or Shannon.

So the point of capacity, for an island such as ours, is moot.

To Sleepy's point, I agree DAA would be a troublesome takeover. But look at Aer Lingus under Muller: He has turned the airline around, and one of his key successes in doing so has been taking an axe to the unions. It can be done, and is better done by a private company than by the Minister for Transport who has his party colleagues screaming in his ear about the vested interests that vote in their constituency.

Under public management we have a giant quango that perpetuated white elephant projects and has an unwieldy and expensive cost structure.

Under the right private management, I think our airports could thrive.

ted1

As an Island nation we can not and should not sell off our main enterance and exit routes.

Fair enough if they outsource the managment of them but they must remain in citizen ownership.

Sleepy

Nijmegen wrote: »

To Sleepy's point, I agree DAA would be a troublesome takeover. But look at Aer Lingus under Muller: He has turned the airline around, and one of his key successes in doing so has been taking an axe to the unions. It can be done, and is better done by a private company than by the Minister for Transport who has his party colleagues screaming in his ear about the vested interests that vote in their constituency.

Under public management we have a giant quango that perpetuated white elephant projects and has an unwieldy and expensive cost structure.

Under the right private management, I think our airports could thrive.

If someone can turn the DAA into a thriving private company, I vote we just hand them the keys to the country afterwards, pay 'em 10 million a year and give them 5 years!

Sleepy

ted1 wrote: »

As an Island nation we can not and should not sell off our main enterance and exit routes.

Fair enough if they outsource the managment of them but they must remain in citizen ownership.

Why?

Permabear

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meglome

beeftotheheels wrote: »

BAA Plc was flogged off by Maggie. Owned the assets, owned the rights for 20 years from '85.

Leveraged take private in 2005 to a consortium headed by Ferrovial (Spanish infra Company) with Singaporean wealth fund and Quebecois public pension fund.

So issue isn't State ownership, it is leveraged buy-outs of infra assets.

The concern is what stops the same type of leveraged buyout of Irish airports. What stops that Eircom type situation.

I don't doubt for as moment that Irish airports could be run more efficiently the other main concern I have is we are on an island and a massive fúckup with this type of infrastructure could hurt us badly. And honestly if Heathrow is an example of how we do things then I say let's not.

beeftotheheels

meglome wrote: »

The concern is what stops the same type of leveraged buyout of Irish airports. What stops that Eircom type situation.

I don't doubt for as moment that Irish airports could be run more efficiently the other main concern I have is we are on an island and a massive fúckup with this type of infrastructure could hurt us badly. And honestly if Heathrow is an example of how we do things then I say let's not.

Ehm, mostly the bursting of the credit bubble!

That kind of leveraged deal won't be happening again for a long time.

But there's nothing to stop the Government maintaining a golden share or whatever to allow them to veto excessive leverage, or to pass an Act limiting the leverage certain infrastructure companies can take on.

It can be done, we just have to weigh up the current cost of restricting the class of buyer to exclude those who intend leveraging the assets up, with the longer term benefits to having infrastructure assets not struggling under the weight of their debt.

meglome

beeftotheheels wrote: »

Ehm, mostly the bursting of the credit bubble!

That kind of leveraged deal won't be happening again for a long time.

Capitalism tends to have short memories.

beeftotheheels wrote: »

But there's nothing to stop the Government maintaining a golden share or whatever to allow them to veto excessive leverage, or to pass an Act limiting the leverage certain infrastructure companies can take on.

It can be done, we just have to weigh up the current cost of restricting the class of buyer to exclude those who intend leveraging the assets up, with the longer term benefits to having infrastructure assets not struggling under the weight of their debt.

To make sure the infrastructure is protected these would be my preferred solutions (or something close to them).

spank_inferno

ted1 wrote: »

As an Island nation we can not and should not sell off our main enterance and exit routes.

Fair enough if they outsource the managment of them but they must remain in citizen ownership.

Why though?

Of what relevance is our watery surrounds to whether ports / airports are retained in government ownership.

liammur

Well anything that can be sold, should be sold, couldn't see any great demand for them though.

ted1

spank_inferno wrote: »

Why though?

Of what relevance is our watery surrounds to whether ports / airports are retained in government ownership.

because a private company can hold us to blackmail. They can increase prices to what ever they want.

They may decide not to work sundays, resulting in no air access to Ireland.

Lots and lots of reasons, why they need to be kept in our hands.

Permabear

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Sleepy

ted1 wrote: »

because a private company can hold us to blackmail. They can increase prices to what ever they want.

Which is why you ensure you legislate a maximum percentage of this infrastructure that can be held by any one organisation and sell the airports one at a time.

They may decide not to work sundays, resulting in no air access to Ireland.

Sounds far more like something a union would demand than a private company who would be aiming for 100% up-time in order to maximise the return on their investment.

Lots and lots of reasons, why they need to be kept in our hands.

Nope, some misguided ideas about why the state should own the airports but no actual reasons.

Duggys Housemate

In general, we should be going the other way, deficit permitting of course. State Capitalism, and dirigisme, produced the most successful economies in the world from 1945-1975, and are doing so today in China.

Privitising the airports is problematic for one smallish reason, and one very large one.

1) Small: Private airports will become shopping malls, more so than now. Bristol airport's new refurbishment means there is no way to exit security without going through the shops, shops which eat into what used to be sitting space. The gates - a long walk now - have no seats, the central concourse has few.
2) Big: it's privatising profits and socialising losses. If the Airport goes under it will have to be subsidised anyway, as we cant really afford to allow Dublin's air traffic to dis-appear.

EDIT: that said I wouldn't care so much were there two airports in Dublin, but one must be in public hands.

Duggys Housemate

southsiderosie wrote: »

OK maybe this is a point of clarification, but there seem to be different scenarios here:

* state owned, state operated
* state owned, with operation rights auctioned off
* completely private

Which one is Heathrow? Because all I remember of that travel debacle were complaints about the Spanish holding company.

As a more general point, one of the key issues I've seen with privatization, especially of local services, is that even if a city sells off assets, if there are operational or customer service problems, elected officials still get the blame. So if you are damned either way, what is the incentive for local officials to sell: a short-term cash infusion to solve budget problems, but a longer-term political problem that, if you are lucky, can be shuffled off to those who come after you?

Its all national of course, in Ireland. But the question remains.

southsiderosie wrote: »

Is there any data on on-time performance or passenger satisfaction in publicly versus privately managed airports? Having been trapped in the Great Heathrow Holiday Travel Debacle of 2010, I am genuinely curious, especially since IIRC there were a lot of complaints afterwards that privatization in that case led to worse contingency planning because the parent company re-directed revenues from Heathrow to other struggling holdings.

My understanding is that the owners of Heathrow - a Spanish company - are in serious difficulties elsewhere, due to the Spanish property bubble collapsing, and indeed are skimping on Heathrow. Low provisions for snow being an example, I was to fly from Bristol later on that week, so was getting worried; and it amazed me how what was basically a snow shower stopped an international airport. No investment in equipment.

Joe 90

ted1 wrote: »

because a private company can hold us to blackmail. They can increase prices to what ever they want.

They may decide not to work sundays, resulting in no air access to Ireland.

Lots and lots of reasons, why they need to be kept in our hands.

Don't you mean the unions?

Duggys Housemate

Libertarian echo chamber has arrived.

cson

Permabear wrote: »

This post had been deleted.

That's well worth a read. If you want of contemporary example of it happening look no further than American Airlines; filed for Chapter 11 almost exclusively to tear up union contracts.

Dr Galen

Duggys Housemate wrote: »

Libertarian echo chamber has arrived.

This is the sort of snipey, one liner style of post that needs to stop - all sides of all arguments

Cheers

DrG

Duggys Housemate

OK, then lets ask the libertarians again do they wish to privatise profits and socialise losses, and what provisions would they have for an owner of an airport going out of business. If the State has to intervene in those cases, why would it ever leave.

BOHtox

ted1 wrote: »

because a private company can hold us to blackmail. They can increase prices to what ever they want.

They may decide not to work sundays, resulting in no air access to Ireland.

Lots and lots of reasons, why they need to be kept in our hands.

No they can't. If they want to make money they'll stay open all the time and have flights arriving from all over the world. If Dublin closes on Sunday well then Cork or Shannon will open on Sunday. It's not the end of the world even if your unrealistic point happens.

They also can't increase prices that much. It's called supply and demand. If prices go up, demand falls and therefore less traffic into Dublin meaning less money for the company. It's not a monopoly in fact it's perfect competition. Flights can come to any airport in Ireland so to keep your airport attractive you don't want to be charging high fees do you?

That's a terrible socialist arguement!

Duggys Housemate

BOHtox wrote: »

They also can't increase prices that much. It's called supply and demand. If prices go up, demand falls and therefore less traffic into Dublin meaning less money for the company. It's not a monopoly in fact it's perfect competition. Flights can come to any airport in Ireland so to keep your airport attractive you don't want to be charging high fees do you?

This kind of argument, in favour of private monopolies, would probably not be made by the most rigid right winger outside of boards. How can a monopoly have "perfect competition?". In what sane universe could that happen? Limerick and Cork are not acceptable distances from Dublin, prices in the private monopoly can rise to any level they want, because Cork is not an option for Commuters who want to travel to or from Dublin.

As I said, were there a second airport it would make a difference. London, of course, has more than one airport. Although even there the State would intervene if the holding company for Heathrow were liquidated.

Chucky the tree

Duggys Housemate wrote: »

This kind of argument, in favour of private monopolies, would probably not be made by the most rigid right winger outside of boards. How can a monopoly have "perfect competition?". In what sane universe could that happen? Limerick and Cork are not acceptable distances from Dublin, prices in the private monopoly can rise to any level they want, because Cork is not an option for Commuters who want to travel to or from Dublin.

Since when?

BOHtox

Duggys Housemate wrote: »

This kind of argument, in favour of private monopolies, would probably not be made by the most rigid right winger outside of boards. How can a monopoly have "perfect competition?". In what sane universe could that happen? Limerick and Cork are not acceptable distances from Dublin, prices in the private monopoly can rise to any level they want, because Cork is not an option for Commuters who want to travel to or from Dublin.

Well from London you can get the boat to Dublin. To Cork you can fly to Shannon or Waterford. To Dublin also there's two private and smaller airports. Even if they do increase their prices, the planes would have to increase their prices. Demand would fall and they'd ultimately move out. Prices have to be kept low for demand and for competition amongst other travel!

Joe 90

Chucky the tree wrote: »

Since when?

Well, in the days of the Aer Lingus nationalised monopoly people took the boat unless they were well off.

Chucky the tree

Joe 90 wrote: »

Well, in the days of the Aer Lingus nationalised monopoly people took the boat unless they were well off.

I'm more wondering how Dublin to cork/Limerick are not acceptable differences, they are and a private company couldn't charge any price they like at Dublin airport.

andrew

Duggys Housemate wrote: »

This kind of argument, in favour of private monopolies, would probably not be made by the most rigid right winger outside of boards. How can a monopoly have "perfect competition?". In what sane universe could that happen? Limerick and Cork are not acceptable distances from Dublin, prices in the private monopoly can rise to any level they want, because Cork is not an option for Commuters who want to travel to or from Dublin.

As I said, were there a second airport it would make a difference. London, of course, has more than one airport. Although even there the State would intervene if the holding company for Heathrow were liquidated.

Then sell one terminal to one firm and the other terminal to another. Boom, instant competition.

FreudianSlippers

Permabear wrote: »

This post had been deleted.

Look at Alaska Airlines as a prime example of a fantastic and profitable US carrier. Record profits in 2010 when legacy carriers were struggling, merging or going bust.

FreudianSlippers

Duggys Housemate wrote: »

OK, then lets ask the libertarians again do they wish to privatise profits and socialise losses, and what provisions would they have for an owner of an airport going out of business. If the State has to intervene in those cases, why would it ever leave.

Who says they would have to "socialise" the losses. Wouldn't the market dictate what the value was and someone else would just buy it?

therecklessone

FreudianSlippers wrote: »

Look at Alaska Airlines as a prime example of a fantastic and profitable US carrier. Record profits in 2010 when legacy carriers were struggling, merging or going bust.

Both Southwest and Alaska Airlines recognise and negotiate with labor unions.

Mr Simpson

To be honest, i'd be wary of privatising airports. A private company would be responsible for setting airport charges and would be free to raise them as they wish, increased airport charges would result in a drop in tourism, something which directly effects the state. I would however be in favour of closing smaller unprofitable airports, only keeping a small amount of airports. Ireland is far too small for the amount of airports we have.

southsiderosie

southsiderosie wrote: »

Is there any data on on-time performance or passenger satisfaction in publicly versus privately managed airports?

But just to reiterate my previous point: is there any data on differences in passenger satisfaction with publicly versus privately managed airports? Is this something that can be pulled apart, or is it too tied into airline deregulation to be able to say that it makes a difference one way or another?

mmcn90

mmcn90 wrote: »

To be honest, i'd be wary of privatising airports. A private company would be responsible for setting airport charges and would be free to raise them as they wish, increased airport charges would result in a drop in tourism, something which directly effects the state. I would however be in favour of closing smaller unprofitable airports, only keeping a small amount of airports. Ireland is far too small for the amount of airports we have.

Its seems to be working out quite well for Knock even with the development fee numbers have never been higher and making a profit, at the expense of shannon the state run airport. But then the airport is run for the people of the region and not for the benefit of unions or anybody else.

ted1

So the general consensus is get rid of the Unions.I'm all for that.

KyussBishop

Dublin Airport appears to be a net-earner for the state, so should be kept in my opinion; what are the advantages of privatization, other than the big paycheck?

If we look at a worst-case scenario, purely for the sake of seeing what might go wrong (just boundary setting here), if a new owner primarily wanted to liquidate assets, what assets are there at the airport which could realistically be stripped out and sold off, that would cause harm to the running of the airport and to traffic? (realistic now; not much profit to gain stripping out the runway and trying to sell that off, even if that's obviously damaging )

How much money has to be invested on a regular basis to keep the airport running? (i.e. what critical infrastructure is there there, which could cause big operational issues if neglected?)

Also, if Dublin Airport were sold into private hands, it would be an effective monopoly for the Dublin region; I'm sure there are a lot of risks involved there.

Duggys Housemate wrote:

2) Big: it's privatising profits and socialising losses. If the Airport goes under it will have to be subsidised anyway, as we cant really afford to allow Dublin's air traffic to dis-appear.

Why would it need to be subsidized though? If seems contradictory to say it's privatizing profits, whilst also saying it needs subsidies.

Reekwind

BOHtox wrote: »

Well from London you can get the boat to Dublin. To Cork you can fly to Shannon or Waterford. To Dublin also there's two private and smaller airports. Even if they do increase their prices, the planes would have to increase their prices. Demand would fall and they'd ultimately move out. Prices have to be kept low for demand and for competition amongst other travel!

That's, um, bizarre. The reality is that people have to fly into Dublin. Period. Getting a boat from London is not a realistic alternative. The only practical alternative for someone flying from, say, Paris would be to fly to Belfast and then take a two hour train south

Halting or limiting flights into the capital would have immensely damaging consequences for the economic health of the city and indeed the country. Yet you propose to install a private company, beholden only to its shareholders, to manage this? In the absence of anything resembling practical alternatives what on earth would cause airport fees to fall or even remain steady?

In pure market economics (hah) this would be resolved by a competitor entering the market when prices had become too high but the immense capital costs of building a new airport effectively precludes that. The result would be a private monopoly that could charge what it wants

KyussBishop wrote:

Why would it need to be subsidized though? If seems contradictory to say it's privatizing profits, whilst also saying it needs subsidies

Can anyone imagine an Irish government letting Dublin Airport close? Of course not, the damage to the national economy would be massive. Covering losses would be necessary in the event that the airport was not profitable

Something similar can be seen in the UK water industry where the nominally privatised water/sewage companies remain heavily reliant on government funding. Water supplies are just too important to allow the companies that run them to fail

andrew wrote:

Then sell one terminal to one firm and the other terminal to another. Boom, instant competition.

Honestly, I'm not sure where to start with this. So let's leave aside the host of technical reasons why operating two airports from the same site makes no sense. Instead, why would you expect that dividing the airport in two, and thus reducing the economies of scale in what is already an expensive operation to run, would benefit anyone? Or is the magic dust of privatisation enough to overcome anything?

FreudianSlippers

therecklessone wrote: »

Both Southwest and Alaska Airlines recognise and negotiate with labor unions.

That doesn't really refute the point though?

southsiderosie wrote: »

But just to reiterate my previous point: is there any data on differences in passenger satisfaction with publicly versus privately managed airports? Is this something that can be pulled apart, or is it too tied into airline deregulation to be able to say that it makes a difference one way or another?

I'm looking into this; but you may be correct in a sense that the airline issues outweigh the airport issues at a fundamental level as far as passenger satisfaction. ORD is a prime example of an airport that is shockingly bad but people just get on with it.

therecklessone

FreudianSlippers wrote: »

This post had been deleted.

I should have included Permabear's post that you yourself quoted that referenced the impact of trade union activity on airline profitability.

Permabear wrote: »

This post has been deleted.

Two of the examples of successful non-legacy airlines recognise unions, that is worth pointing out.

Sleepy

therecklessone wrote: »

Two of the examples of successful non-legacy airlines recognise unions, that is worth pointing out.

Yes, but those unions have always had to deal with real businesses, not politicians trying to buy their votes / unaccountable public servants.

The unions in those companies have never been spoiled so their expectations are more reasonable. Or from the owner's perspective, it's not a matter of taking excessive pay and conditions back off them, it's a matter of ensuring they never get them in the first place, something any employer will tell you is a far easier task.

markpb

Reekwind wrote: »

Yet you propose to install a private company, beholden only to its shareholders, to manage this?

Except that it wouldn't. It would be (as DAA is now) regulated by the Irish Aviation Authority and Commission for Aviation Regulation. Among other things, the prices they can charge airlines are already regulated - that wouldn't change if it was privatised.

therecklessone

Sleepy wrote: »

Yes, but those unions have always had to deal with real businesses, not politicians trying to buy their votes / unaccountable public servants.

In the context of Permabear's point all of the legacy airlines he is referencing are privately owned.

While the impact of a regulated airline industry was certainly felt beyond the deregulation act in 1978 I'm not sure you can blame politicians or public servants for the airlines taking 35 years to adjust to the new realities of a deregulated market.