|Airport Economics Manual (Section Eight)|
This chapter focuses on ICAO’ s policies on airport charges and provides the framework for the guidance material contained in this manual.
Part-B—Focuses the additional policy guidance in ICAO’ s policies on charges for airports and air navigation services (Doc-9082); explains how the policy was developed and highlights some principles that States have found of particular interest.
Finally, Part-D--- summarizes ICAO’ s current with regard to the use of charges for environmental.
In summary, Article 15 sets out the following three basic principles
This chapter addresses various aspects of the organizational structure of airports.
Part-A presents the forms of organization that can be used at the national level, be it under government ownership and control, or with private participation or involvement. This part also addresses the issue of airport networks and the steps and precautions that States should take in the transition towards a commercialized or privatized regime.
Part-B addresses the mechanism for economic oversight that States may wish to establish for overseeing the practices of airport operators.
Organizational Forms At the National Level
This part focuses on various organizational formats which airports operate. Considering the diverse circumstances involved, it is not the intent to recommend one organizational format over another but rather to provide guidance to States by describing relevant aspects of each format. The decisions made by individual States as to the organizational format under which their airports should operate will depend on the situation in the State concerned and will often be strongly influenced by government policy. Constitutional and administrative arrangements as well as the experience of other States may also affect decisions on organizational format. Recent trends in airport ownership and control have shown that the various organizational formats used by States can be regrouped into two main types. The first type falls under government or public ownership and control, which is still the predominant form of organizational, and the second
Government Ownership And Control In Airport Management And Operation
Government or public ownership may take the form of direct control and management, for example through a Civil Aviation Administration, or through another ministerial department, or bodies regional or municipal levels of governments. Government control cal also be exerted through bodies benefiting from a certain degree of autonomy, such as a government body with financial and operational autonomy, an autonomous corporation established under the provisions of a special statute (a statutory body), or a company established under company law. Under this type of management, airports remain under the overall ownership and control of the government and the organizations operating them are expected to act with public interest in mind rather than primarily governed by profit considerations, although this should not preclude the setting of clear objectives and adoption of best commercial practices. This option may provide flexibility to States in ensuring that the development of airports will suit their national political, social and economic requirements. Finally, it has to be noted that in some cases the government may keep the ownership of airports (land/or facilities), while the operation (i. g . the control) is vested to other interests.
Airports Within A Government Department
While a growing number of international airports are being operated under the format of an Autonomous airport entity, many airports are still operated by government entities.
Where the operation of one or more airports represents only one of many functions performed by an administration, consideration needs to be given to a number of organizational and managerial features that promote efficient airport operations. Perhaps most important among these is to organize each airport or group of airports as a separate entity or department within the administration, with the department head reporting directly to the director of the administration.
It would also be necessary to clearly describe the decision-making authority vested in the head
If is necessary to establish a separate set of accounts for each airport, since costs and revenues pertaining to airport operations cannot otherwise be identified. It should, however, be noted that the administration’s accounts might not be kept in a format that is responsive to the requirements of airport management. Should that be the case, the airport department could supplement the administration accounting format by establishing its own internal accounting system that would meet these requirements. The format of airport accounts and their possible itemization is addressed in Chapter-3.
Autonomous Airport Entities
An autonomous airport entity is essentially an independent body established for the purpose of operating and managing one or more airports, one objective of which is to permit local and user needs to be better met. In some instances, the scope of such autonomous airport entities has have also been established exclusively to operate and manage air navigation services, particularly with regard to the en-route (and approach) phase(s) of flights.
the autonomous airport entities is growing in all regions. They are particularly common in Europe and the United States. For example, in a majority of the States in Europe, the major international airports are operated by autonomous airport entities. While the establishment of an autonomous airport entity would not necessarily result in an unprofitable airport becoming profitable, experience gained worldwide from these developments indicates that where airports have operated by autonomous entities their overall financial situation has generally tended to improve. Consequently, it is recommended that, where this is the best interest of provides and user, States consider establishing autonomous entities to operate their airports.
The Autonomous Civil Aviation Authority
Assigning the operation of one or more airports to an autonomous airport entity may not, in certain circumstances, be a good approach to improving airport operating efficiency. For example, in a small State with limited Aviation activity and where the operation of an international airport is the dominant function of the Civil Aviation administration, little if anything may be gained by separating the airport operation from the Civil Aviation Administration and assigning it to an autonomous airport entity established exclusively for that purpose. In fact, costly duplication could result if each of the two bodies carries out functions previously performed more efficiently and at a lower total cost by the Civil Aviation Administration. This applies particularly to administrative costs and overheads.
The reduced responsibilities of the Civil Aviation administration would normally include Aviation Safety and various Licensing, Monitoring, Policy, and regulatory functions. As a result of having been divested of airport operations, however, the administration would no longer have the financial benefit of the common use of premises and equipment, the costs of which were, at least in part, financed by airport revenues. With its revenue-generating capacity severely restricted, it could also be more difficult for the reduced Civil Aviation Administration to obtain from the government the funds it requires to perform its activities. Another factor to be considered in these circumstances is the potential for rivalry between the new autonomous airport entity and the Civil Aviation Administration, and its possible consequential detrimental effects on aviation development.
Private Participation Or Involvement In Airport Ownership And Operations
Privatization is the word most commonly used in connection with the changes taking place in the ownership and management of airports. Often, the word privatization is loosely interpreted as any move away from government ownership and management of airport services. Privatization connotes either full ownership or majority ownership by private interests of airport facilities and services. Therefore, a management contract, a lease, as well as minority participation in the equity of airports should not be described as privatization, but rather as private participation or private involvement since the ownership and control rests with government Private participation/private involvement, which are synonyms, mean that the private sector has a role in the ownership and/or management in the provision of airport services, and that majority or ultimate ownership remains with the government.
Private participation or involvement can take different forms. However, management of commercial concessions, in particular retail outlets, at an airport by a private entity is not considered as private participation or involvement. Although airports are owned, in a majority States, by the government (a State, provincial or municipal government or a combination of any of these), a growing number of airports are now under some form of private ownership or involvement. IN some States, airport entities ( managing and operating either a single airport, or an airport system, or an airport network) have now been privatized; in others, plans are under way for private involvement in airports in a number of ways, including leasing, part ownership or the ownership of parts of an airport such as terminal buildings. In the latter case, where a part of an airport ( such as a passenger terminal) is privately owned and operated , leaving the rest of the airport in public ownership, measures need to be taken to ensure that the privatized element of the airport makes a proper contribution to the costs of operating the rest of the airport, for instance by payment of a significant concession or lease fee.
Described below are some of the most common forms of private participation/involvement that are used for airport management and operation
Institutional Arrangements: Checks and Balance
Research and experience have shown that regulation of the economic behavior of monopoles can be achieved through the power of information, and also through countervailing economic power of well-informed customers who are epitomized by airlines at an airport. Information can be harnessed through the development of certain institutional arrangements in shaping a commercial monopoly. Once in place, such arrangements can foster a routine of checks and balances between service providers and users that brings about fair, reasonable and efficient prices and levels of service. While nor ‘’automatic’’ in the manner of free markets, regulation through institutional checks and balances users the power of information to transmit the right signals and responses between users and providers in lieu of the bureaucratic power of government agencies.
Examples of institutional arrangements include
While various types of organizational structures can be used to ensure effective management and internal communications for different types of operating entities, examples of some generic airport organization charts are included in the following pages. Although each airport
The establishment of the most suitable organizational chart for an airport ( or group of airports) should take into account the following factors: