Commercialization and Privatization of Airports - Essay Example

Commercialization and privatization of airports have both positive and negative outcomes. Positive results include:

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One of the primary reasons of commercializing airports is financial constraints experienced by states when governing the airports. This burden is taken away as financial responsibilities are entirely or partly shifted to investors or partners.

The probability that management and decisions made will be economically rather than politically driven is increased through privatization.

Private companies are viewed to put customer service into more consideration than state companies. For this reason, customer service offered in privatized airports are set to be of high standards.

Threats posed by the commercialization of airports.

As it can be seen, commercialization of airports can be both a blessing to the government and a curse. Some of the major effects that arise due to airport marketing are as described below.

Loss of jobs

Most airports if not all begin as public airports fully owned by the government, or the government is the major shareholder. The staff that works in these airports is usually employed by the government, and as such, not all of them will be in a position to retain their employment status once the ownership of the airport is transferred to the private sector due to the commercialization of the airport. During this process where the private sector assumes the property from the government, most if not all of the staff is usually overhauled and replaced by a new set of employees deemed to be more competent by the new management. As a result, the change of ownership of an airport from the government to the private sector may affect the current staff negatively by reducing their likelihood of retaining their employment status as the new management may not necessarily decide to continue working with them resulting in the loss of jobs to other individuals.

Failure of the public Interest Test

Controversy does suggest that managers who are private may not act in the stakeholders' best interests. Therefore, privatization will and can only achieve effectiveness if and only if the managers have been given incentives so that they can act in a way that promotes the public interests. However, this is not the case when it comes to airport commercialization. As the public interest is strong in airport operations, that is, size and the level of services, accessibility to these services and the prices to these services. It is therefore argued that the full and unrestricted or unfettered privatization of airports will fail the public interest test. Therefore, it is recommendable for the state to remain the primary stakeholder of the airport to safeguard the public interest for it is only them (the government) who can be in the position to put the public interest above all other factors such as maximizing profits (Cook, 2017).

Public Exploitation.

The most common form of commercialization is privatization. With an airport, marketing comes public exploitation. This can be attributed to the fact that the primary emphasis of marketing is to maximize profits and what better way to achieve this than increasing aeronautical fees to extreme levels. This is because they do not have accessibility to some of the privileges that are obtained by the public sector such as free property taxes, tax-exempt bond availability and reduced fees. It can be observed that public airports are way cheaper compared to privately owned ones due to the incentives provided by the government. Private airports don't have these incentives and are therefore more expensive so that they can get maximum profits (Augustyniak, 2010).

Inadequate Investment.

In their quest to maximize the profits received, commercialized airports start cutting on the operational costs leading to reduced investment. This is injurious to the existence of the airport since all airports need just about enough investment capital to bolster its operations thus ensuring smooth working of every entity within it. Such transactions may be facilitated by excellent security which is a factor that requires lots of investment. Also, installing state of the art facilities to handle the customers and goods exchanged in the airport. As such all these would be rendered impossible due to airport commercialization which is profit centered leading to less money being disbursed to the pool of investments (Augustyniak, 2010).

Safety

As it can be deduced from the point above, poor investment leads to less money being invested in the security department of the airport. As such, there has always been a major concern for the safety of privatized airports which or airports which have been commercialized. Government owned airports always have the best security since they have government resources at their disposal. Its very unfortunate the same cannot be said about commercialized airports since most strive to decrease the cost of their operations while at the same time maximizing their profits, therefore, rendering sectors such as the security department highly questionable. It can, therefore, be argued that the safety and protection of commercialized airports are not always right due to the reasons stated here (Augustyniak, 2010).

Poor Standards of Service

Aside from the safety and security, commercialized airports are also prone to poor standards of services delivery. This just like security can also be attributed the fact that the primary driving force of the entire airport is the maximization of profits ahead of public interest. Therefore, most of the services being offered by the airport will be below the average or acceptable standard (Augustyniak, 2010).

In consideration of non-operational issues

Most of the commercialized airports are more likely to give very little or insufficient attention to non-operational environmental issues such as environmental impacts of their activities and maintaining social justice (Augustyniak, 2010).

Monopolistic exploitation of the public

Another factor of risk is the tendency to monopolizing in airports. When a private owner owns the monopolistic company or when a commercialized airport belongs to a private owner, there arises the risk of imposing exorbitant charges, at the same time decreasing the air traffic. Consequently, it will lead to lowering of a region's external factors. Area monopoly for airports is also known to increase the risk of a hostile takeover (Augustyniak, 2010).

Noise

Commercialization of airports makes them less likely to comply with the regulations governing noise produced by the airport. Their greatest concern is making profits thus they start disregarding the factors that require breaking the bank to regulate or enforce their regulations using substandard methods. As such the noise produced from commercially owned airports are more likely to be more harmful to the public compared to government-owned airports (Poole, 1994).

Commercialization and privatization of airports are expected to continue. Many governments are faced with the difficult decision of whether or not to commercialize or privatize their airports as a solution for dealing with financial constraints and also for investment or commercialization purposes.

The entire process of marketing is a bittersweet one. It has both its benefits and risks. However, as much as marketing may be...