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Friday, Aug. 12, 2011

EDITORIAL

Airport reform in Japan

A study panel of the infrastructure and transport ministry has released a report on the privatization of 27 airports managed by the central government. At present, the central government usually manages aviation-related facilities, such as runways, at these airports, while companies set up jointly by local governments and private investors manage other facilities such as terminal buildings and parking lots.

There is a problem with this arrangement. Even if terminal buildings and parking lots make profits, the profits cannot be used to reduce landing fees. That's because two different management entities are involved. The arrangement has made it difficult for those airports to become attractive to airline companies.

Under the privatization plan, special-purpose companies will be set up to manage facilities directly related to aviation and other facilities. These companies will not buy the runways or other aviation-related facilities, but instead will be entrusted by the central government to manage them. Since they do not have to buy aviation-related facilities, their initial investments are expected to be lower than they would be otherwise.

As a result, the companies can first consider whether to lower landing fees. If lower fees attract airlines, including low-cost carriers, more revenue from the operation of terminal buildings and other nonaviation facilities will follow.

The ministry plans to decide on a grand policy, including principles for airport reform, in fiscal 2012. Then it will start consultations with local governments concerned.

The procedure for entrusting airport management to private entities would start in fiscal 2014. The ministry hopes to end the necessary procedures by fiscal 2020.

The question is whether there are private entities interested in managing airports. The ministry expects that pension funds looking for investment opportunities and companies with experience in managing overseas airports will be interested in managing Japanese airports. Some local governments are reportedly interested in managing airports.

It is hoped that officials of these private entities and local governments will rack their brains to find ways to make Japanese airports attractive and competitive.



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