All Clear for Takeoff: Evidence from Airports on the Effects of Infrastructure Privatization

81 Pages Posted: 5 Oct 2022 Last revised: 25 Oct 2022

See all articles by Sabrina T Howell

Sabrina T Howell

New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)

Yeejin Jang

UNSW Australia Business School, School of Banking and Finance

Hyeik Kim

University of Alberta - School of Business

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: October 3, 2022

Abstract

Infrastructure assets have undergone substantial privatization in recent decades. How do different types of owners target and manage these assets? And does the contract form—control rights (concession) vs. outright ownership (sale)—matter? We explore these questions in the context of global airports, which like other infrastructure assets have been privatized by private firms and private equity (PE) funds. Our central finding is that PE acquisitions bring marked improvements in airport performance along a rich array of dimensions such as passengers per flight, total passengers, number of routes, number of airlines, cancellations, and awards. Net income increases after PE acquisitions, which does not reflect lower costs or layoffs. In contrast, in the few cases where non-PE acquisitions bring some improvement, it appears to reflect targeting rather than operational changes. Overall, we find little evidence that privatization alone increases airport performance; instead, infrastructure funds improve performance both in privatization and subsequent acquisitions from non-PE private firms. These effects are largest when there is a competing airport nearby. Finally, we show that outright ownership rather than control rights alone is associated with the most improvement after privatization.

Keywords: Infrastructure, Privatization, PE, Airports

JEL Classification: G32, G38, L32, R42, H54

Suggested Citation

Howell, Sabrina T and Jang, Yeejin and Kim, Hyeik and Weisbach, Michael S., All Clear for Takeoff: Evidence from Airports on the Effects of Infrastructure Privatization (October 3, 2022). Fisher College of Business Working Paper No. 2022-03-010, Charles A. Dice Center Working Paper No. 2022-10, European Corporate Governance Institute – Finance Working Paper No. 850/2022, UNSW Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4237006 or http://dx.doi.org/10.2139/ssrn.4237006

Sabrina T Howell (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Yeejin Jang

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Hyeik Kim

University of Alberta - School of Business ( email )

2-43 Business Building
Edmonton, Alberta T6G 2C7
Canada

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER)

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United States

European Corporate Governance Institute (ECGI) ( email )

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Belgium

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