Working Paper: NBER ID: w30544
Authors: Sabrina T. Howell; Yeejin Jang; Hyeik Kim; Michael S. Weisbach
Abstract: Infrastructure assets have undergone substantial privatization around the world in recent decades. How do these assets perform post-privatization? This paper examines global airports. Our central finding is that the type of ownership matters: Volume, efficiency, and quality improve substantially under private equity (PE) ownership—both following privatization and in subsequent transactions—but there is little evidence of improvement under non-PE private ownership. This remains the case for airports sold in auctions in which PE and non-PE firms bid, mitigating concerns about selection. PE owners invest in new physical capacity and appear to negotiate more effectively with airlines, especially in the presence of a state-owned flag carrier. Higher prices and more retail revenue increase net income, with no evidence of cost reductions or layoffs. We find that improvements are concentrated when there is a competing airport nearby, under longer-term leases, and when the local government is less corrupt. One explanation for the failure of non-PE private firms to outperform government ownership is that they tend to target more corrupt locations.
Keywords: No keywords provided
JEL Codes: G32; G38; H54; L32; R42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Privatization under private equity (PE) ownership (L33) | significant improvements in operational metrics (Y10) |
| Privatization under non-PE ownership (L33) | no significant effect on performance metrics (C52) |
| PE ownership (H43) | expansions in terminal size (F43) |
| PE ownership (H43) | increase in the share of larger aircraft (L93) |
| PE ownership (H43) | 108% increase in net operating income (L21) |
| Local competition and corruption levels (H57) | influence success of privatization (L33) |
| Presence of state-owned flag carrier (L93) | exacerbates benefits of PE ownership (G32) |
| Privatization (L33) | improved airport performance (L93) |