Airport Privatization Has St. Louis Surveying an Unexplored Frontier. Who's in the Pilot's Seat?

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Fundamentally, Principato says the privatization question comes down to a city's specific goals.

"The best reasons to do it have to do with whether there are better and more efficient ways to run the airport," he says. "Are there better and more efficient ways to generate the financing that you need? Probably the worst reason is to just get a pile of cash, because you can only do that once."

The airlines are also a critical factor. Currently, Lambert's major source of traffic is Southwest Airlines, which commands more than 50 percent of Lambert's air traffic by weigh. The FAA requires any privatization deal to meet approval from at least 65 percent. Without its approval, St. Louis' application would be dead on arrival. (A Southwest spokesman says that while it is too early in the process to comment, the company is "open to working with the city and doing what's best for the community and airport users.")

Airline consent could be a major complication for any private operator. In a 2014 analysis by the federal Government Accountability Office, private-sector stakeholders complained that privatization deals overseas generally include just two parties, the seller and prospective buyer. By including both airlines and the federal government, the FAA crowds the negotiations with four parties.

A 2017 follow-up report warned that private investors angling to increase profit by jacking up airport landing fees or rent "may bring them into conflict" with the airlines. And beyond that specter potentially souring the deal on the front end, it could have catastrophic effects for any airport they actually take over.

"What do you think the biggest competition is for St. Louis' airport right now?" Principato asks rhetorically. "The answer you usually get is Kansas City and Chicago. But the competition for your airport is every other airport. If I'm an airline, I can take my main asset and fly it 500 miles per hour away from you and you'll never see me again. The airlines can go anywhere in the country where they feel they can make incrementally more revenue."

Still, airlines have shown themselves amenable to privatization in the past, and some strategies for a private operator would raise revenue without touching the airlines, such as expanding (or raising prices on) concessions, retail and parking services.

Then again, as Chicago found out in 2008, even a done deal can be undone by outside forces. That year, an unanticipated economic collapse forced the winning bidder to back out of its promised $2.5 billion up-front payment and 99-year lease as its financing turned to sludge.

In privatization circles, "Chicago" may as well be an epithet. The same year the Midway deal fell apart, the city, desperate to chip away at its $9 billion unfunded pension liability, inked a 75-year contract to lease its parking meter operation and fee collection to a private consortium for $1.15 billion — just the sort "pile of cash" mindset Principato warns against. Indeed, the deal soured almost immediately, as the consortium raised prices and positioned itself to reap long-term profits far above what it paid the city.

The parking meter deal produced a scorching public rebuke for then-mayor Richard Daley, one reason the city's next mayor, Rahm Emmanuel, took a far more cautious approach to a second attempt to privatize Midway. Emmanuel sought a shorter-term lease and required bidders to agree to revenue sharing and a "Travelers' Bill of Rights" to protect customers from price-gouging.

But those conditions cut too deeply into the bidders' valuation. When one of two possible bidders pulled out in 2013, Emmanuel finally ended Chicago's seven-year flirtation with privatizing Midway.

"We must be willing to say 'no' when partnerships don't measure up to our standards," Emmanuel said at the time. In total, Chicago's failed Midway experiment cost the city more than $16 million.

And the only successful version of the experiment, in San Juan, poses a "unique situation," as Steve Van Beek warns.

Van Beek worked directly with a bidder who bought a second round of shares at that airport. He notes that the airport wasn't just looking to expand its capacity or optimize its concession sales; instead, Puerto Rico was struggling to fulfill the basic tasks of an airport even as it struggled with big debts. The airlines involved agreed that it would be better to remove the airport's operation from government control.

"That confluence of circumstances — a state in debt, airlines and airport agreeing that the current government authority isn't working and therefore we need to change it — those are conditions that are aligned in very few places at very few times," he says. "Puerto Rico is a good example of the [pilot program] working, but whether it's a good example that can be applied to other airports, I'm less sure."

A former official in Clinton's Department of Transportation, Van Beek has observed the FAA's flirtation with privatization from its inception.

"I always thought the program was doomed to fail," he says.

Nearly two decades later, he still believes privatization is a worthy option for airports, but he echoes Principato's cautionary perspective.

"There should be a rational chain of thought about what the issues are and why privatization is either the preferred method of doing it, or a method that should be considered," he says. "The big question is, what is the problem they want to solve?"

To Slay, that problem is an airport that left its potential in the past. But with his retirement, it's up to Krewson and her allies to figure out what that means for the future.

For now, the city's leaders debate an unrefined idea wrapped in a mysterious and as-yet-unexplained contract with an unknown private company or companies. Its elected lawmakers struggle to adjust to the whiplash-realization that their city is even considering such a deal — while Rex Sinquefield, the man bankrolling the process, lurks in the background as every Democrat's villain even as his spokesman insists he has the city's best interests in mind.

Perhaps we are like the public in 1927, waiting warily for reports of the Spirit of St. Louis' safe landing. Our hands aren't on the controls, but there is a sharp hope in the air. What a triumph it could be. Or, what a disaster.

Follow Danny Wicentowski on Twitter at @D_Towski. E-mail the author at [email protected]

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