8. The Basic Agreement

Metro cannot be privatized without the approval of the airlines using it. Gaining acceptance of privatization requires that there be benefits from privatization. At face value, the varying charges paid by the airlines at Metro versus the BAA airports suggest a wide difference. [49] However, there are certain factors which must be considered in examining this price variance:

a) Under the current agreement, if a major airport expansion is undertaken at Metro, prices would rise dramatically for airline activity fees to cover the expenses for bonds and interest cost.

b) The services at the airport are, in effect, subsidized by the people of Wayne County. Because the land on which the airport is located is tax-exempt, Wayne County residents are subsidizing the airlines.

c) Just as the British airports, before privatization, generated net earnings for the British government, it is clear that other private airports can be profitable as well. The addition of an airport owner's profit margin should not have a significant impact on airport charges for the airlines.

d) Once expansion at Metro begins, costs will not be inflated by political decision-making. Private airport management would make decisions based on the needs of its customers and avoid unnecessary political trappings.

e) BAA has kept many of the civil servants from the national government who were employed at the airports before privatization. Their wages and other costs that tend to be higher in Great Britain contribute toward making British airports more expensive to operate, all other things being equal.

f) Capacity limitations are even more severe in Great Britain. A resource that is more scarce should cost more.

Privatization has the potential for keeping future cost increases below what they might be in a less-efficient public ownership setting. The private sector can operate less expensively and therefore generate a profit for itself without a significant increase in charges to the airline.

We have also argued that depending on the future pricing structure, landing fees could be lower if the airport operator chooses to maximize revenue by encouraging greater usage.

We have also observed that a different pricing structure has the benefit of making price known and not subject to unknown variables and complex accounting systems. Removing politics from decision-making is another key benefit for the airlines. The orientation towards the customer (airport user) instead of the County's taxpayers offer the airlines the knowledge the airport will better accommodate their passengers.