11. Setting a Price

The best method to establish a price for an airport is uncertain. The value of an airport might be determined by establishing the insured replacement value of its facilities. However, this isn't an effective method because there is no need to insure runways and other parts of the infrastructure that are not subject to damage from fire or acts of nature. Further, its 5,000 acres have no insured replacement value. The current book value of the airport of $157 million reflects value established many years ago and is probably much less than the current market price.

When BAA was sold to the public by the British government, no predetermined price was set. The government set a price per share and let the market determine the price based on how many shares were purchased. In essence, the British government sold the facilities and the goodwill of existing management and the tremendous market dominance those airports have in international air travel to and from Great Britain. Cash flow and total revenue were important factors.

Investors were allowed to make all necessary decisions in determining whether the price of the stock was appropriate and how many shares to buy. Before the sale of BAA, theorists argued that "potential investors will realistically be able to consider the privatization of [BAA] only after the

Government has decided the nature of the entity that is to be sold and what will be the regulatory framework within which it will operate." [50]

The airports were sold through a sale of stock to the public which generated $1.9 billion. A similar sale of Metro might be arranged where the county would privatize the airport's management and sell stock in the new company.

Metro airport might also be sold to a single investor, consortium of investors or its management (through a leveraged buy-out). By opening up the sale to a bid process, the potential investors would establish the appropriate price through competitive sealed bids. Decisions would be based on the ability of the investors to earn a profit on their investment.