While the U.S. has a reputation in the world for smaller government and greater free enterprise, nearly everything about aviation is an exception. U.S. airlines were already heavily subsidized before the pandemic, but an explicit $79 billion in appropriations (not counting tax relief and subsidies for contractors) underscored that.
However it goes far beyond that. In the U.S.,
- airports are owned by governments
- airport security is done directly by government at most airports
- air traffic control is managed by the government
From the moment a passenger steps inside the government airport, goes through a government checkpoint, and has their aircraft’s movements dictated from gate-to-gate by federal authorities, they’re in the hands of government far more than private enterprise. And nearly everything that is nominally private is regulated at a highly granular level.
Best practices for safety in both security screening and air traffic control would separate out the role of regulatory supervision from actually performing duties. The TSA, effectively, supervises itself which is bad for accountability. So too for managing the movement of aircraft, which leads to more costly service, more congested airspace, and more limited investment in technology.
In much of the world screening is done privately and regulated by the government, air traffic control is much more efficient in other areas of the world (NavCanada is a great model, and handles not just Canadian traffic but also across the North Atlantic), and airports are privately owned representing a great revenue opportunity for local jurisdictions.
The Reason Foundation took a look at just how much major U.S. airports are worth. 31 airports may be worth $131 billion. For instance,
- Chicago O’Hare is worth $7 – 10 billion
- Phoenix Airport is worth $3 – $4.5 billion
- LAX is worth $12 – 18 billion
- Dallas – Fort Worth is worth $8 – 12 billion
Airports are worth billions of dollars, but they generally don’t contribute to paying for local services even though they’re almost invariably owned by local governments. That’s because federal regulations don’t allow local governments to receive airport net revenue (profit). This is also unique in the world – governments elsewhere generate substantial revenue from their airports.
So the way to unlock this value is not to actually own the airports. Taxpayers have these huge assets they don’t benefit from owning, but it doesn’t have to be that way. Because federal rules allow airports to be leased out long-term, with lease revenue supporting local government budgets. You can decide whether that money should pay down debt (or cover long-term pension liabilities), lower taxes, or go towards social services. But it’s money that’s mostly just locked up now (a handful of airports are grandfathered out of this, including the Port Authority of New York and New Jersey).
The Reason study has some important caveats – you’ll see both a gross and net valuation for each airport because U.S. law requires airport bonds to be paid off in the event of a lease.
There are some elements of privately-run airports consumers like – they tend to do a better job providing services passengers will pay for – there are downsides as well. Anyone that’s ever gone through the Sydney airport knows they’re routed through duty free for a reason but remember that even the Chicago O’Hare and Dallas – Fort Worth airports have removed people movers to ensure passengers walk more and are encouraged to drop into shops.
Airports aren’t the only assets that could be unlocked that we rarely hear about. Did you know that the federal government owns over 600 million acres of land or more than a quarter of the land in the entire country?