Politics scuppers St. Louis airport privatization

St. Louis Lambert International Airport in Missouri has ended its controversial exploration of going private. Mayor Lyda Krewson pulled the plug Dec. 22 after a two-year process to consider leasing the airport to a private operator. Krewson previously supported studying whether privatization could generate as much as $2 billion, enough to cancel nearly $600 million in airport debt and provide about $900 million for capital improvements over the next decade.

Cargo throughput at the airport has been on the rise, reaching nearly 75,000 tons in 2018, a 3.1% increase over the 2017 volume. Amazon Air began operating a daily flight at St. Louis Lambert in September. The proposed privatization attracted at least one bidder with major air cargo interests.

The privatization debate pitted politicians and business leaders against one another amid charges of conflicts of interest. Opponents charged that special interest groups were spearheading the effort. They maintained the city shouldn’t give up control of a key asset and that a private operator would put bottom-line profit ahead of public service. Similar arguments have surfaced in other failed efforts to sell operating rights at U.S. airports.

Bidding for a long-term lease on the airport attracted 18 big-name suitors. Among the bidders were Corporacion America Airports (CAAP), which operates airport and cargo terminals at over 50 airports in Europe and Latin America; and Aena International, a Spanish state-owned company that operates 46 airports in Spain and holds shares in 17 additional airports in Europe and the Americas.

Also among the suitors were Global Infrastructure Partners, a major private equity player that holds a minority stake in London Gatwick Airport and owns and manages Edinburgh Airport in Scotland; and Public Sector Pension Investment Board and AviAlliance, a Canadian pension investment manager and its German subsidiary, holders of a minority stake in Aerostar Airport Holdings, which operates Puerto Rico’s privatized Luís Muñoz Marín International Airport.

While private operation of airports is common in other countries, particularly in Europe, privatization of U.S. airports is a thorny issue. With St. Louis Lambert as a non-starter, only Airglades International Airport, a proposed all-cargo facility in Florida, remains on the Federal Aviation Administration’s approved projects list.

Since the FAA’s privatization program began in 1996, only two U.S. airports have adopted such plans, with one eventually returned to public management.

The FAA approved privatization of Luís Muñoz Marín International, the busiest airport in the Caribbean, in 2013 under a 40-year concession. That airport remains as the only privatized airport that remains in private hands. Major integrators, including DHL, FedEx and UPS, operate at Luis Muñoz Marín. Air cargo operators, including Avianca Cargo, Cargolux and iAero Airways (formerly Swift Air), also serve the airport. Total exports from Puerto Rico amounted to $18.1 billion in 2018, led by pharmaceuticals and medicines, according to the U.S. Bureau of Labor Statistics.

Stewart International Airport in Newburgh, New York, became the first commercial service airport, participating in the FAA’s privatization program from March 2000 to October 2007.

The Port Authority of New York and New Jersey bought out a lease on the airport in January 2007 in hopes of reducing congestion at the bi-state agency’s three major airports: LaGuardia, Kennedy and Newark.

Other airports have not fared so well under the privatization program. The best-known case was in Chicago, where the city withdrew an application to privatize Midway Airport when the number of bidding parties dropped to one, raising concerns that the lack of competition might undercut the airport’s value.