A Decision Framework for Successful Private Participation in the Airport Sector

In, S. Y., Casemiro, L., & Kim, M. J., (2017) “A Decision Framework for Successful Private Participation in the Airport Sector,” Journal of Air Transport Management. Volume 62, Pages 217-225

9 Pages Posted: 7 Dec 2015 Last revised: 26 Dec 2017

See all articles by Soh Young In

Soh Young In

Global Projects Center, Stanford University; Precourt Institute for Energy, Stanford University

Luiza Casemiro

Stanford University - Freeman Spogli Institute for International Studies

M. Julie Kim

Stanford Global Projects Center; BeneTellus

Date Written: May 1, 2017

Abstract

As private participation in public airports becomes a global trend, there are a number of concerns and debates over the conflicting interests of the private and public sectors. For instance, the private sector’s interest in maximizing profits often opposes the public sector’s interest in protecting the public interest and social welfare. In this paper, we reframe the conflict in terms of principal-agent theory, and inform policymakers to understand public-private management problems in a broader context. Firstly, we demonstrate how various ownership and governance structures shape the private participation based on (1) ownership-type, (2) mode of ownership shift, and (3) ex-post government control. Secondly, we then highlight that this process should be context-based, and examine the recent case of Incheon International Airport (IIA) in South Korea to illustrate the importance of contextual factors. Lastly, we provide comprehensive recommendations to policymakers involved in bringing private partners into the airport sector, which include setting a clear agenda, exercising a reasonable level of control, understanding the sharing of risk and responsibility under different structures, and assessing technical, economic and political factors that may affect the policy outcome.

Keywords: airport development; public infrastructure; ownership and governance; principal-agent problem; public-private partnership; privatization

Suggested Citation

In, Soh Young and Casemiro, Luiza and Kim, M. Julie, A Decision Framework for Successful Private Participation in the Airport Sector (May 1, 2017). In, S. Y., Casemiro, L., & Kim, M. J., (2017) “A Decision Framework for Successful Private Participation in the Airport Sector,” Journal of Air Transport Management. Volume 62, Pages 217-225. Available at SSRN: https://ssrn.com/abstract=2687907 or http://dx.doi.org/10.2139/ssrn.2687907

Soh Young In (Contact Author)

Global Projects Center, Stanford University ( email )

473 Via Ortega, Suite 242
Stanford University
Stanford, CA 94305
United States

HOME PAGE: http://https://gpc.stanford.edu/

Precourt Institute for Energy, Stanford University ( email )

473 Via Ortega, Suite 324
Stanford University
Stanford, CA 94305
United States

HOME PAGE: http://https://energy.stanford.edu/

Luiza Casemiro

Stanford University - Freeman Spogli Institute for International Studies ( email )

Stanford, CA 94305
United States

M. Julie Kim

Stanford Global Projects Center ( email )

Stanford, CA 94305
United States

BeneTellus ( email )

P O Box 9310
Marina del Rey, CA 90295
United States
213-949-0525 (Phone)

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