Fact Sheet – What is the Airport Privatization Pilot Program?

by King Aircraft Title, Inc. on September 27, 2012

The airport privatization pilot program is designed to allow airports to generate access to sources of private capital for airport improvement and development. The 1996 Reauthorization Act, Title 49 United States Code §47134, authorized the Federal Aviation Administration (FAA) to establish the pilot program. The 2012 Reauthorization Act increased the number of airports that could participate in the program from five to 10. The same restrictions on participation apply. Only one large hub airport can participate in the program; one of the airports must be a general aviation airport. Commercial service airports can only be leased and general aviation airports can be sold or leased. The program now permits up to 10 public airport sponsors to sell or lease an airport with certain restrictions, and to exempt the sponsor from certain federal requirements that could otherwise make privatization impractical. Most commercial service airports in the United States are owned and operated by local or state governments. Public-use general aviation airports are both publicly and privately owned.

AIRPORTS IN THE PRIVATIZATION PROGRAM Chicago Midway Airport (MDW) Chicago Midway Airport (MDW), a large air carrier hub airport, owned and operated by the city of Chicago, handles more than 17 million passengers and 253,000 aircraft operations (calendar year 2008). The City also owns and operates Chicago O’Hare International Airport. Status:The FAA expects to receive a revised preliminary application including a revised timetable and a distribution ready copy of a request for qualifications or interest from the city of Chicago by December 31, 2012.

Hendry County Airglades Airport (2IS) Airglades Airport, a general aviation reliever airport in Clewiston, Florida, is located 80 miles from Miami International Airport. The airport is owned and operated by Hendry County. The airport has a 5,603-foot runway, a general aviation terminal and hangars. Hendry County’s preliminary application was approved by the FAA on October 18, 2010. Status:The airport sponsor is negotiating an agreement with a private operator.

Luís Muñoz Marín International Airport (SJU) Luís Muñoz Marín International Airport, a medium-hub airport is owned and operated by the Puerto Rico Ports Authority. In 2008, the airport had 4.6 million passenger boardings. The FAA approved the Authority’s preliminary application for the Luís Muñoz Marín International Airport on December 22, 2009. Status:  The airport sponsor published a Request for Qualifications in July 2011 and prequalified six potential bidders to submit proposals.  On July 19, 2012, the Puerto Rico Ports Authority selected Aerostar Airport Holdings as the winner of a public bidding process to become the private operator of the Luis Munoz Marin International Airport. The FAA will hold a public meeting on the final preliminary application to privatize the airport on September 29, 2012.

AIRPORT INFORMATION IN THE DOCKET To review information on the airports submitted to the docket go to: www.regulations.gov.

Chicago Midway, Docket Number FAA-2006-25867 Airglades, Docket Number FAA-2008-1168 Luís Muñoz Marín International, Docket Number FAA-2009-1144

AIRPORT PRIVATIZATION FACTS What does FAA’s acceptance of the preliminary application mean?An airport sponsor who wants to participate in the airport privatization pilot program must receive preliminary FAA approval, through an application process, to reserve one of the five slots available under the program. Once the FAA approves the preliminary application, the sponsor can select a private operator to manage the airport, negotiate an agreement with the private operator, and prepare a final application for submittal to the FAA.

Application process. A public airport sponsor and the private operator selected to purchase or lease an airport may request participation in the pilot program by filing an application for exemption under Title 49 United States Code §47134(a).

  • A public sponsor may submit a preliminary application for FAA review and approval. It must contain summary narratives identifying the objectives of the privatization initiative, a description of the process and a realistic timetable for completing the program, current airport financial statements, and a distribution ready copy of the request for proposal. The FAA has 30 days to review the preliminary application.
  • When the FAA approves the preliminary application, the applicant is guaranteed one of the five slots in the program.
  • The airport sponsor may select a private operator, negotiate an agreement, and submit a final application to the FAA. There is no timeline for the FAA to complete its review of the final application.
  • After the FAA reviews and approves the final application and lease agreement, it publishes a notice in the Federal Register for a 60-day public review and comment period.
  • The FAA completes its review, prepares its Findings and Record of Decision (ROD), addresses the public comments in the ROD, and publishes the agency decision.
  • If the FAA approves the ROD, it monitors the legal settlement and transfer of the airport from public owner and sponsor to the new private operator and sponsor.

Number and category of airports. The legislation authorizes 10 airports to participate in the program. At least one must be a general aviation airport and no more than one large hub air carrier airport may participate. Under the pilot program, general aviation airports may be leased or sold, but an air carrier airport may only be leased.

Exemption from federal requirement. The 1996 Reauthorization Act permits the FAA to exempt an airport sponsor from certain requirements that could otherwise make privatization unattractive. First, the public airport sponsor may receive an exemption to use the lease or sale proceeds for non-airport purposes. Generally, all proceeds from the lease or sale of airport land must be used for the capital or operating costs of the airport. This exemption requires the approval of 65 percent of the air carriers at the airport (by number of carriers and by landed weight). The FAA also can exempt a public sponsor from an obligation to repay federal grants and return property acquired with federal assistance upon the lease or sale of the airport.

Conditions for granting exemptions. The FAA approval is based upon a number of conditions listed in Title 49 United States Code § 47134. These include the private operator’s ability to assume the public operator’s grant obligations, and ensure continued access to the airport on reasonable terms. The private operator must operate the airport safely, maintain and improve the airport, provide security, mitigate noise and environmental impacts, and abide by existing collective bargaining agreements. The public operator must provide a plan for continued operation of the airport in case of bankruptcy of the private operator.

Federal assistance. The private operator of an air carrier airport may receive Airport Improvement Program (AIP) grants, collect Passenger Facility Charges, and charge reasonable fees. Airport rates and charges that exceed the Consumer Price Index require approval of 65 percent of air carriers. Private operators of general aviation airports can receive AIP discretionary grants.

Federal oversight. Airports in the pilot program must comply with Title 14 Code of Federal Regulations Part 139 and with Transportation Security Administration requirements for airport security.

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