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

Abstract

Infrastructure assets have undergone substantial privatization around the world in recent decades. How do these assets perform post-privatization? This paper examines global airports. Our central finding is that the type of ownership matters: Volume, efficiency, and quality improve substantially under private equity (PE) ownership—both following privatization and in subsequent transactions—but there is little evidence of improvement under non-PE private ownership. PE owners invest in new physical capacity and appear to negotiate more effectively with airlines, especially in the presence of a state-owned flag carrier. Higher prices and more retail revenue dramatically increase net income, with no evidence of cost reductions or layoffs. We find that improvements are concentrated when there is a competing airport nearby, when the local government is less corrupt, and with longer-term leases.

Keywords: Infrastructure, Privatization, PE, Airports

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