Take Out a Contract on Detroit Metro

Waiting in long lines for everything from a boarding pass to a cheeseburger. Slow luggage delivery. Expensive parking. Jammed concourses. Surly workers. Small, dingy restrooms. Long walks from one flight to another that leave you worn out, with the only "consolation" being that the connecting flight is delayed anyway.

All that may sound like a scene from a Woody Allen movie set in some banana republic, but to traveling Michiganians it rings with familiarity. It’s just another day at Wayne County’s Detroit Metro Airport.

A recent private study commissioned by 36 U.S. airports surveyed 90,000 passengers. They collectively ranked Metro dead last for overall quality. The poor rating is in spite of hundreds of millions of dollars and many commendable efforts by county and airport officials to make Metro, in the words of airport director David Katz, "the most friendly place on the planet." The planned opening of a new mid-field terminal in 2001 will help, but realizing Katz’s ambition probably will require something much more dramatic and fundamental.

These problems are not insurmountable, nor are they new or unique to Metro. A growing number of governments around the world are ending similar troubles but they’re doing so by employing more than cosmetic changes. They are taking to the idea that private, for-profit firms have the incentive and the expertise to operate airports better than almost any public, politicized bureaucracy. They are privatizing the management, and in some cases even the ownership itself, of their airports.

Nearly twelve years after Great Britain sold seven of its largest airports—including Heathrow, Gatwick, and Glasgow—the program has proven to be successful by every measure. An astonishing 2.2 million citizens bought 1.4 billion shares in the newly-privatized British Airports Authority (BAA). The flying public has been greeted with an aggressively entrepreneurial attitude aimed at pleasing customers, the airports themselves have undergone substantial physical improvements, and the British government is receiving tax payments from BAA instead of watching subsidies drain its treasury.

The British model is spreading. Patrick Cowell, president and CEO of Airport Group International, reports that, "countries from Germany to Australia are now racing to privatize their airports." Leasing three airports to private industry will put nearly $3 billion into the Australian government’s coffers. Operation and management of most of Canada’s largest airports—including Vancouver—are now in private hands, as is air traffic control.

In the U.S., there have been no outright sales of major commercial airports, but contracting with private companies for operation and management is taking off. Allegheny County in Pennsylvania contracted with BAA in 1992 for design, construction, leasing, and management of a retail complex for Pittsburgh International Airport. The resulting "AirMall" attracted new businesses, helped passenger sales increase 238% through 1997, and generated at least 900 new jobs and over $550 million in county tax revenue.

In 1995, daily management of Indianapolis International Airport was turned over entirely to BAA. The company agreed to a performance-based contract in which certain cost savings had to be met before it would be paid. This spurred dramatic cost reductions, but at the same time, BAA added 22 new retail stores, 2,300 new parking spaces, and a shuttle bus service that boosted the airport’s non-airline revenue by 20 percent (and still growing).

In a 1988 study for the Mackinac Center for Public Policy, John M. Kost proposed privatization of Detroit Metro Airport, warning that the failure to do so would likely make a bad situation worse. Kost is even more right in 1998 than he was in 1988: politics is at the heart of the problem, not the solution.

If Indianapolis and Pittsburgh—indeed, even London and Singapore—can privatize, why isn’t Detroit doing it? One reason is political inertia. Politicians naturally resist any move that diminishes their role.

Another reason is organized labor. Excessive labor costs due to featherbedding and cumbersome work rules have characterized too many Wayne County operations. For a privately-run Metro to happen, those practices must give way to more reasonable and hospitable labor-management relationships.

Yet another reason is the virtual veto power over privatization held by the airport’s dominant carrier, Northwest Airlines. The company has expressed concern about privatization’s effect on landing fees, but those concerns may be unfounded. Indianapolis landing fees have remained low since BAA took over because the company understands that it’s not in its interest to gouge its major customers.

With the kind of "can-do" spirit that once built Detroit into a great city, all of these obstacles to privatization can be erased. All parties—politicians, labor unions, and the airlines—must start by recognizing what a powerful tool for regional economic development a privatized and revitalized airport can be. They must understand that in the long run, their private interests will be best served if they do a better job at serving the interests of the public. Failure to seriously consider the promising option of airport privatization may be nothing less than the squandering of a great opportunity for Michigan.