Are Private Airport Leases the Key to Infrastructure Improvements?

With airports struggling to maintain their infrastructure and facilities, could leasing the operations to private companies provide them with an influx of cash? One think tank believes semi-privatizing airports in similar fashion to how European hubs operate could be the key to funding future improvements.

It’s no secret that American airports are struggling to maintain world-class facilities. One libertarian think tank believes the key to driving future improvements could be in private-public partnership through airport leasing. In their latest report, the Reason Foundation argues leasing 31 major U.S. airports could generate up to $131 billion, which could be used towards upgrades and paying down debt.

Leasing Airports to Private Companies in Key Cities Could Drive Infrastructure Improvements

In the infrastructure bill championed by U.S. president Joe Biden and passed by the Senate, the Associated Press reports $25 billion would go towards airports. The money would be used to facilitate runway upgrades, improve air traffic control towers and their technology and rebuild terminal buildings. However, the amount is relatively small compared to the potential revenue which could come from airport leases.

Under a public-private partnership, governments would lease airport facilities to private companies, which would be responsible for operating and improving the facility. In turn, the companies would then pay a lease fee to the government – either in regularly scheduled payments or one full sum. Many airports across the world operate under a public-private partnership, including Amsterdam Airport Schiphol (AMS), Frankfurt Airport (FRA), London Heathrow Airport (LHR), London Gatwick Airport (LGW), and Sydney Airport (SYD).

Although governments in the United States have considered this option – the report notes the Chicago Department of Aviation twice attempted to lease Chicago Midway Airport (MDW) to private parties – only one American airport runs in this

If more governments were to pursue a public-private partnership, the Reason Foundation estimates governments could generate over $131 billion. Among the major airports, a lease of Los Angeles International Airport (LAX) could be worth $17.8 billion, leasing San Francisco International Airport (SFO) could drive $11.9 billion in value, while Dallas/Fort Worth International Airport (DFW) could fetch $11.9 billion in a lease deal.

Chart courtesy: Reason Foundation

“American airports are extremely attractive to infrastructure investors and governments should be looking to maximize the value of these assets,” Robert Poole, director of transportation policy at Reason Foundation and author of the study, said in a statement. “Local and state governments could get high quality airport management and use the proceeds from long-term leases to fund other infrastructure projects or pay down existing debt, including unfunded public pension liabilities.”

Post-Pandemic Environment Could Encourage More Private-Public Partnerships

With the entire aviation industry starting to recover, the time could be ripe for governments to explore private-public partnerships. In 2018, Lexology notes the Trump administration signed a bill into law which made it easier for governments to enter leases with airports by allowing governments to take an interest in the private airport operator, while exempting them from repaying prior federal grants upon entering an approved lease. Furthermore, the study notes that a bid to purchase the company operating Sydney Airport came in at 26-times the 2019 earnings before interest, taxes, depreciation and amortization of the airport itself. Between these developments, it could be plausible for more governments to consider leasing out their facilities.