Privatizing Lambert: Boon Or Boondoggle?
In 1996, the United States Federal Aviation Administration created a program to encourage the privatization of the country’s airports, which are largely public. Since then, only one airport has successfully privatized through the program, but St. Louis Lambert might be next.
This past June, the City of St. Louis’ Board of Estimate and Apportionment approved a contract for an advisory team to review bids from private firms seeking to take over operations at Lambert International Airport. After the exploration is completed, the advisory team will present their data and findings to City Hall, the FAA, and the airlines in order to make a final decision.
[su_pullquote]This process may seem to be an independent and balanced consideration of privatization. It isn’t.[/su_pullquote]The advisory group is comprised of transportation consultants and investment bankers primarily from the firms Moelis & Company and McKenna & Associates, and the team will be funded in full by nonprofit Grow Missouri, Inc. Given the mandate of City and FAA approval as well as a qualified advisory team, this process may seem to be an independent and balanced consideration of privatization. It isn’t.
Prior to the confirmation of the contract, eighteen of the twenty-eight members of the St. Louis Board of Aldermen wrote a letter urging the Estimate and Apportionment Board to discontinue negotiations with the selected advisory group. They cited concerns of an unbalanced framework and conflicts of interest. In fact, according to the advisory board’s own operation website, the contract with the City stipulates that many of the advisory team members will be paid more if the airport ends up being put up for lease. This effectively incentivizes the advisory team to recommend privatization to the City, even if their research suggests that doing so would not necessarily be a positive transition for passengers and residents.
But it doesn’t end there. Grow Missouri, Inc. is funded by Rex Sinquefield, a conservative activist, political mega-donor, and vocal advocate for airport privatization. The firm also employs Jeff Rainford, the chief of staff to former mayor Francis Slay. Not only did Slay initiate plans for the privatization project as one of his final acts in office, but he has also received campaign donations from none other than Rex Sinquefield.
A slanted framework. Mega-donor money. Political interests. Do these set of circumstances necessarily imply that the privatization project is completely compromised by political bargaining and shady back-room deals? No, but the conflicts of interest should not be overlooked.
In fact, the prospect of privatization may be worth considering. Proponents believe that a private airport would be more competitive and thus increase revenue, while opponents think that any extra funds would fall into corporate pockets instead of being reinvested into the airport. Specifically in St. Louis, supporters of privatization hope to relieve Lambert of its $600 million in debt, while others cite a recent uptick in traffic and revenue as a sign of success under public ownership.
Who’s right? It’s hard to say. There are very few examples of private commercial airports in the United States, and those in Europe are difficult to compare given variables like differing economic structures, transportation options, and even geographic layout. But many empirical analyses have been conducted to control for these variables and deduce the impact of ownership structure on airport success. A 2005 study by Jose Tongzon for the journal Transportation Research concludes that the greatest airport productivity boost is obtained from partially private ownership. Tongzon specifies that, as long as governments encourage some corporate participation without releasing regulatory power, revenues are likely to increase.
So, case closed? Not so fast. A 2012 report written by Bijan Vasigh for the Journal of Transport Literature conducts a similar analysis, but investigates the United States specifically. Vasigh concludes that privatization would not improve the productivity of American airports. But notably, he doesn’t disagree with Tongzon, either. Vasigh explains that, given the sheer quantity of accessible airports in America and the fiscal independence with which they operate, U.S. airports already behave like private entities with public regulation. As a consequence, no action needs to be taken. However, Vasigh does note that the best way to determine the effects of privatizing a particular airport would be to analyze region-specific market environments.
Sound familiar? That’s exactly what the advisory group was hired to do. Perhaps the market conditions around St. Louis are conducive to privatization. Perhaps relinquishing some operational duties to private contractors would boost productivity. Privatizing Lambert may in fact be a beneficial transition for St. Louis, but the City deserves to have a non-partisan, unbiased, and impartial evaluation of this process before it’s cleared for takeoff.
Daniel Berkovich ‘21 studies in the College of Arts & Sciences. He can be reached at dberkovich@wustl.edu.