Last month President Clinton signed a bill which authorized the sale of 6,500 acres of federally controlled land in Ivanpah Valley to Clark County. The county plans to use the land to build a new airport. With a target opening date of 2009, the facility will serve cargo carriers and charter flights, and reduce demand at McCarran Airport, which is scheduled to reach its passenger capacity in 2010. Yet the most promising tool to improve air travel in Nevada remains largely overlooked by transportation planners: privatization. Herewith, and examination of airport-privatization successes elsewhere, and a look at how market-oriented reforms can ensure that Nevada’s airports meet the needs of customers, not politicians.
Freedom in the Skies, Politics on the Ground
In 1978, President Carter signed the Airline Deregulation Act, which removed federal control of ticket prices and air routes. Two decades later, airfares are 27 percent lower than they were during regulation. Eight out of every ten passengers now pay less than they would have if government still set prices. According to economists Steven A. Morrison and Cliford Winston, air deregulation saves the American economy over $20 billion annually. More cities than ever are served by the airlines, and thus, more people than ever are flying. The number of domestic passengers has grown from 254 million in 1978 to 582 million in 1999. And safety did not decline—in fact, flying has become even safer.
But as any longtime flyer knows, while costs are down and options are up, service is slipping. Flight delays this summer were up again, even more than during 1999, which was a record year for tardiness. Opportunistic politicians—including Nevada Sen. Harry Reid—are pushing legislation to force airlines to improve their service. Yet passengers and politicians who call for a return to regulation miss the true cause of today’s air-travel woes. “Deregulation freed the airlines to innovate and compete,” writes Reason’s Virginia Postrel, “but the airports and air traffic control system are still owned and operated by government agencies. They are essentially static institutions run through a combination of technocratic central planning and political log-rolling. The free market in airline travel still relies on socialist infrastructure.” The Mackinac Center for Public Policy’s Lawrence W. Reed agrees: “For consumers, the free market has worked well in the skies. It’s on the ground, where politicians and their employees rule the roost, that problems often seem so frustratingly intractable.”
In Las Vegas, Reno and nearly every other American city, airports are owned and managed by government entities. “Among other things,” writes privatization expert Robert Poole, “this means that their management style is more passive and risk-averse than that of the world’s growing body of privatized airports, now numbering more than 100 (and including the main airports in such cities as Auckland, Buenos Aires, Dusseldorf, Johannesburg, London, Melbourne, and Rome).” So it should hardly be surprising that inefficiencies abound, as do opportunities for corruption. To ensure a revenue source for bonds, for example, airport authorities often sign long-term gate leases with major airlines, deals which effectively give the companies veto power over terminal expansion. In addition, airports also charge landing fees based on airplanes’ weight, not gate demand. Thus, smaller planes can land at major airports, while at the same time causing gridlock for jumbo jets. As the Ludwig von Mises Institute’s Douglas Carey notes, “Nearly every major airport in this country is funded by taxpayers and run by the local government. This … is not only responsible for the amazingly poor service that is seen at airports, but it is also responsible for widespread corruption in the industry that causes all of us to pay more for plane tickets.” Last year, even the U.S. Department of Transportation found that public ownership of airlines hurts consumers: “Airport business practices play a critical role in shaping airline competition. Access at many of the nation’s airports is limited . . . because of long-established airport business practices.”
Privatization Success Stories
“Worldwide,” write Poole and fellow privatization scholar Adrian Moore, “60 airports have been privatized in the 1990s.” There is mounting evidence that this revolution is successful. For example, privatizing three airports in Australia saved that nation nearly $3 billion. In addition, research by Oxford University’s Asheesh Advani revealed that privatized airports are substantially more “passenger-friendly” than government-run airports. Advani surveyed passengers at more than 200 public and private airports. “It is really quite simple,” he concluded. “When powerful incentives, such as the profit motive, drive an organization’s strategy, it is in their interest to design services around the needs of their customers. Absent similar incentives, an organization has less use for customer feedback.”
The airport-privatization trend isn’t thriving in the United States yet, but it has taken root. Indianapolis International Airport contracted out its management in 1995. Both the airlines and the city enjoyed lower costs, and the airport is now far more responsive to passengers’ needs. The federal government enacted the Airport Privatization Pilot Program in 1997. Privatization has been successful at smaller airports, many of which are run by COMARCO Airport Services, the largest operator of airports in the nation.
As long as airports remains under the thumb of the public sector, the promise of truly free-market air travel will not be realized. Clark County’s plan to build a new airport gives transportation officials a chance to experiment with privatization from the start. If successful, it could serve as an inducement for other privatization experiments in Nevada. Airports in the Silver State should be freed from politics. The market can provide air travel and air transport in Nevada that is as cheap, efficient and pleasant as possible.
D. Dowd Muska is a contributing editor for Nevada Journal, the Nevada Policy Research Institute’s policy and investigative magazine.