Successful Hong Kong Airport Privatization Demands Long-Term Vision and Economic Regulation says IATA

"Privatization of Hong Kong Airport must benefit the general public, travellers, airlines, and shippers not just the operators of the airport and the Government," challenged Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA). His comments followed the Hong Kong Government's announcement to partially privatize the Hong Kong Airport Authority.

"We are encouraged that the Government has announced that it will work with all stake holders in the privatization process. This is essential and a good start. We all know that a healthy air transport industry is at the core of Hong Kong's future. It goes well beyond the 45,000 airport jobs. Privatization is far too important to be viewed as a quick fix to the Government's current budgetary difficulties. Long-term vision is needed," said Bisignani.

From the outset, strong and independent economic regulation must be established as part of the privatization process to ensure:

* just and reasonable charges

* timely and cost-effective infrastructure development

* acceptable service standards

"Privatization must not give a private monopoly a license to print money at the expense of the greater Hong Kong economy. Economic regulation is required to maintain a balanced bargaining position for the airport's users and guarantee the airport's role as a catalyst for overall economic development. Airline involvement in the privatization process will be key to ensuring that all  of Hong Kong benefits from an efficient privatized airport," said Bisignani.

Transparency is critical. Valuation of the asset base and a realistic return should be determined in advance of the sale of assets to set appropriate expectations among potential investors. Benchmarking of airport capital and labour productivity against best practice, as well as incentives to stimulate efficiencies should be part and parcel of the process.

"Airlines have experienced airport privatization in many parts of the world. Where governments were greedy with a short-term vision, there have been some spectacular failures. The Hong Kong economy needs a success story. That will only come if the Government leads with a strong long-term vision," said Bisignani.

Bisignani was in Hong Kong on August 4 to discuss airport privatization plans, among other issues, with key government officials.