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Friday, May 2, 2008
Could ABIA be privatized?Austrailian powerhouse mulls the option
Austin Business Journal - by Kate Harrington ABJ Staff
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Sarah Kever
Proponents of leasing all or part of ABIA say the newfound revenue could pay for projects such as light rail.
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City leaders are talking with Australian infrastructure powerhouse Macquarie Group Ltd. about potentially leasing all or part of Austin-Bergstrom International Airport.

Macquarie representatives approached some council members and business leaders individually in recent months, says a source familiar with the conversations. While there is no formal proposal yet, sources say Macquarie representatives would like council members to post an agenda item so it can engage the city's Aviation Department in discussions about the possibility of a private company managing the airport.

City leaders discussed the possibility of eventually privatizing the airport in 2007, but this is the first time that a private company has been linked with ABIA.

Proponents of a leasing deal say that leasing ABIA could add up to $500 million to the city's general fund annually, but acknowledge that the road to privatization is fraught with hurdles and public wariness of putting public infrastructure into private hands.

The Macquarie Group owns and operates five airports in cities worldwide, including Sydney Airport, Bristol International Airport and Japan Airport Terminal. In the United States, the company is also involved in private toll road development. Worldwide, Macquarie Group has about $200 billion invested in infrastructure, from electric utilities to roads and airports.

Macquarie executives couldn't be reached for comment.

Federal law prohibits the city from spending airport revenue on anything but the airport, says Council Member Betty Dunkerley, so ABIA currently contributes nothing to the city's general fund -- which in many years, including this one, falls short of revenue expectations. Other city departments, such as the convention center and Austin Energy, do funnel profits into the city's general fund.

ABIA's total operating revenue for the 2007 fiscal year was $81.9 million, and $17 million of that revenue went back into the airport's capital fund, says ABIA spokesman Jim Halbrook.

"We are entirely at a very, very conceptual level about how this might work," says a source familiar with Macquarie's conversations in Austin. "Plus, while the big banana might be to go for an FAA exemption ... there are many other steps short of that that Macquarie may be willing to talk to the city about. [Possibilities] run all the way from a management contract to turn over airport operations through a contractual arrangement ... to having them come in and manage one piece of the airport. There's all kinds of ways the city could unload some of the headaches of operating the airport, short of privatization."

Under a 1996 federal pilot program, U.S. airports can apply for an exemption from the Federal Aviation Administration. Under that program, up to five U.S. airports can be leased to a private company if the FAA and 65 percent of airlines using the airport give their approval.