June 27, 2011 Leave a comment
By Respicio A. Espirito Santo Jr.1, Erivelton Pires Guedes2, Dorieldo Luiz dos Prazeres3, Rogerio Pecci Filho4
During the AIRPORT EVOLUTION LATIN AMERICA 2011 conference in São Paulo on May 11th‐12th what many suspected became true: neither Infraero nor the federal authorities in Brasilia have a “Plan B” to the current torrent of various bottlenecks and very low level of service at major Brazilian airports for the short‐term (neither for the FIFA Soccer World Cup of 2014). And this was confirmed by the evasive responses given by the representative of Infraero during the before mentioned event when specifically asked about this matter.
Also, the lecturers agree on the fact São Paulo needs urgently a new airport. As a matter of fact, considering that nothing real has been done and officially confirmed by the government at the time of writing, common sense suggests that – as strange as it may sound – probably there is also no “Plan A” as well. Complementing it, GRU’s Terminal 3 is “being designed” and “the project is on time” since the late 90s when the then‐president of Infraero “confirmed” that it would be operational “in the next few years”. Twelve or more years have passed, domestic enplanements in Brazil have more than doubled since then but there isn’t a single brick of GRU’s T3 put in place. Considering the above plus all the past mis‐sayings and long‐lasting undefined issues, a question arises: Is there any strategic planning culture at Infraero and at the higher government levels regarding airport infrastructure?
In order to collaborate with the debate, the authors have written this 2‐page article highlighting a series of relevant aspects to be raised in the discussion. These aspects were built up on a simplified bullet‐point format.
What the Brazilian government (and the Brazilian society) should be looking for in terms of airport infrastructure and airport management to effectively modernize the current slow‐pace, centralized and monopolistic model:
a) Safety and security (this must always be the starting point, no matter in the world where the airport is located).
b) Agility and flexibility for planning, operations and management decisions.
c) Multi/plural and systemic approaches and expertise.
d) A continuous flow of (and large amounts of) capital/investments.
e) Direct competition between airports.
f) Modern, future‐thinking management and operational practices.
g) A very high level of service (in all terms) for passengers, companions, visitors, and all other airport customers.
h) Pro‐active and direct partnerships plus coordinated planning, operations and execution between the airport operator, airlines, border control and immigration authorities, law enforcement, transit and transportation authorities, environmental authorities, health authorities, etc.
i) The airport as a social, cultural and economic multiplier for its catchment area.
j) The airport as a multi‐service provider for the Brazilian society, the economy and the aviation industry.
Looking at the above, concessions of airports to private consortiums, authorizations to private firms built and operate private airports, and wise public‐private partnerships (PPPs) immediately come into the debate. We could sum these three as “privatization” options. Following this way, it is possible to list the potential reasons for privatization as:
a) To encourage more efficient and commercial operations.
b) To reduce/minimize government bureaucracies.
c) To secure financing and building of airport infrastructure on a faster pace.
d) To access international expertise.
e) To provide a wider share of ownership.
f) To provide funds for governments (and for non‐profitable airports).
g) To increase flexibility, speed and wider‐view approaches in daily, tactical and strategic decision making.
h) To install or increase direct competition within the airport system (between airports).
i) To indirectly promote airline competition.
j) To turn the airport into a true social catalyzer and economic multiplier.
k) To turn passengers, companions, visitors, airlines, catchment area businesses, etc. into customers and not simple “users”.
However union representatives and other individuals will argue that major airport management and operation is a “strategic” and “sovereign” activity that cannot be passed on to private firms. Besides this, it is common to hear that Infraero is “the largest airport operator in the world” and its critical problems are not internal, but a result of some “unreasonable” federal regulations and very rigid oversight by the TCU, the Brazilian parallel of the U.S. General Accountability Office.
In response to the above, not only there are several much more “strategic” and “sovereign”‐related services that have been privatized in Brazil (telecommunications and water distribution/treatment, just to mention two of a set that could be labeled as “truly strategic”), but there is a set of conveniently forgotten aspects that are never raised by the ones against any sort of privatization:
a) Infraero‐managed airports do not belong to Infraero.
b) Infraero is a state‐owned and state‐controlled company guided by federal government policies, not otherwise!
c) As a direct result of the above, Infraero does not have the right to claim or to input any ‘political pressure’ regarding its preference to manage this or that airport.
d) Infraero is not a concessionary; it is a firm that represents the federal government for airport operation and management.
e) Infraero’s full cross‐subsidy model is not well seen by ICAO.
f) Other state‐owned and state‐controlled organizations are immersed in highly competitive and open markets (like Petrobras, Banco do Brasil, etc. and operate very successfully!), therefore – if faced by strong private airport operators – Infraero should not fear anything.
g) Just as mentioned above, other once 100% state‐controlled and state‐run sectors – much more “strategic” than airports – have been “privatized” in Brazil and the level of service to the general public has been overwhelmingly enhanced if compared to when operated by state firms.
But in order to achieve any significant success in any future airport privatization model (either concessions of the entire airport, or just the passenger terminals, or several PPPs, or authorizations), several aspects must be very well taken care of and special attention must be focused on:
a) The regulator (in the Brazilian case the National Civil Aviation Agency, ANAC) must be strong, proactive, system wide‐thinking/planning, neutral and independent from the government.
b) The regulator must elaborate a wise, thorough and comprehensive (yet uncomplicated) bidding process and the concession/privatization contract itself.
c) The concession contract must contain a future expansion plan for at least a 20‐year horizon.
d) The concession contract must introduce the obligation of an extensive array of plausible, measurable and to‐bepublicized and to‐be‐monitored indicators (social, economic, environmental, etc).
e) The concession contract must impose a set of present and future environmental obligations and responsibilities.
f) The concession contract must impose and state the terms of establishing direct and continuous society/community participation and how it would function as an “outside controller” and a “guardian” of specific
terms of the concession contract itself.
Though privatizing some of its major airports, Brazil would introduce direct competition between airports; with competition comes efficiency and much better services to the public, companions, visitors and to the airlines. Besides privatizing, the federal government could also turn a few major airports to its home States to operate and manage (São Paulo‐Congonhas/CGH would be a clear potential example). By doing this, more competition would take place. And the expectation with all this new competition is that Infraero will definitely be a much better organization.
Many people in Brazil ask “Why privatize?” But the question to be thoroughly answered should be: “Why not?!”
1 Corresponding author: firstname.lastname@example.org email@example.com
2 D.Sc. in Transportation Engineering, firstname.lastname@example.org
3 MBA in Air Transport Regulation, email@example.com