IATA cautions against airports privatization

The International Air Transport Association (IATA) has urged governments to take a cautious approach when considering airport privatization.

The clamor for airport privatization seems to have caught up in the last few weeks.

Shortly after Kenya announced plans to have national carrier Kenya Airways manage Jomo Kenyatta International Airport (JKIA), neighboring Ethiopia announced similar move, the government saying it is open to partially sell off Ethiopian Airlines to investors.

However according to IATA chief economist Brian Pearce, such moves may counterproductive for the aviation industry.

“We have done a study looking at performance which shows that, private airports are more expensive to users and secondly and surprisingly, they are not that more efficient either,” Mr Pearce said during the 74th IATA annual general meeting in Sydney Australia.

IATA Director General and CEO Alexandre de Junic said airports have significant market power and would benefit more from government support in positioning them as aviation hubs.

“Effective regulation is critical to avoiding its abuse particularly when run for profit by private sector interests,” Mr de Juniac said.

The position was also held by Kenya Airways group chief executive officer Sebastian Mikosz, who attended the meeting.

Mr Mikosz said the airline was not looking to privatize airport operations but enter into a partnership that would boost the carrier’s competitiveness by having a bigger say in airport management.

“I don’t think that the continent at this stage is prepared for a massive privatization or even privatization as such. The continent wants more traffic and public support is seen as one of the elements to get this traffic,” Mr Mikosz said.

Currently about 14 percent of airports globally have some level of privatization handling close to 40 percent of global traffic.

In the Kenyan deal, sources indicate that that Kenya Airways and the Kenya Airports Authority will venture into a public private partnership where KQ will assume the position of a private party taking over the management and operational expenditure of JKIA, while KAA will serve as the contracting authority.

Kenya Airways will also enjoy tax breaks among other incentives allowing them to compete favourably with other regional and international airlines

The process is expected to take place within a year.

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