Air Transport Sector Restructuring

1
Air Transport Sector Restructuring

• Victor Craig
• Director Air Transport
• Halcrow AirPlan - Malaysia

2
Air Transport Sector Restructuring

• What is Restructuring in Air Transportation ?
• Any change in form of administration, function,
  operation and ownership
• ...to achieve improved service delivery, staff
  productivity and financial performance

3
Air Transport Sector Restructuring

• Who are the Principal Candidates ?
• National Air Carriers
• Civil Aviation Administrations
• Airport Administrations

4
Air Transport Sector Restructuring

• Why Restructure Civil Aviation ?
• Improve delivery of services to users
• Improve financial performance
• Remove counter productive constraints imposed by
  Government structures
• but
• - Radical change not always best solution
• - Issues Implications must be studied
• - What has been done elsewhere may not suit
  another application

5
Air Transport Sector Restructuring

• National Air Carrier Restructuring
• Many National Carriers have been restructured
• Moved away from Government control
• Reinforced commercial focus
• Involved ownership change - full or partial
  privatization
• Involved major route, service and fleet
  rationalization
• Involved improving staff productivity

6
(No Transcript)
7
Air Transport Sector Restructuring

• Restructuring Civil Aviation Administration
• Several Developed Nations have restructured Civil
  Aviation Airports Administration
• ICAO has taken initiative to implement
  restructuring in Developing Nations

8
Restructuring Civil Aviation Administration

• Form of Restructuring Differs
• 1. By Corporate / Legislative Concept
• Government Entity
• Autonomous Entity
• Private Entity
• 2. By Function
• All Civil Aviation Functions Retained
• All Except Specific Functions (e.g Accident
  Investigation)
• Only Specific Functions (i.e. separate ATS or
  Airports)

9
Restructuring Civil Aviation Administration

• Typical Options
• Restructure within Government
• Separate Parastatal Agency
• Separate Not-For-Profit Corporation
• Hybrid Structure - Government Commercial
• Government Regulator Single or Multiple
  Commercial Agencies for Specific Functions
• No single solution suits all cases
• Over time, one option may evolve to another

10
(No Transcript)
11
Restructuring Civil Aviation Administration

• Typical Evaluation Criteria
• Safety Security Ability to Raise Capital
• Staffing Commercial Self-Sufficiency
• Functional Overlap Max Commercial Potential
• Reduced Govt Funding Future Flexibility
• Transition Costs Balance Profit Motive
  Public Interest

12
(No Transcript)
13
Restructuring Civil Aviation Administration

• Restructuring Considerations for Airports
• 1. Can airport(s) be self-sustaining - now or in
  the future ? Positive cash flow for ROI ?
• 2. Is privatization appropriate, rather than
  commercially-focused public corporation ?
• 3. What are the motives for privatization ?
• 4. Privatization traps present ?
• (profit motive effect, competing markets and
  environmental management conflict)

14
Restructuring Civil Aviation Administration

• Restructuring in Other Countries
• Developed Nations
• UK, Australia, New Zealand, Canada
• Developing Nations - 2 Examples
• Botswana (Africa) Jordan (Middle East)

15
Restructuring Civil Aviation Administration

• Developed Nations - United Kingdom
• Dept. of Transport - International Affairs
• Civil Aviation Authority - Regulation
  (Parastatal)
• Air Traffic Services (NATS)
• - Parastatal - to be Privatized Later
• National Airports
• - Originally British Airports Authority
  (Parastatal)
• - Privatized in 1986 - now BAA plc.
• Other Major Airports - Now Privatized
  Corporations
• - Major Investors Airport Developers

16
Restructuring Civil Aviation Administration

• Developed Nations - Australia
• DOT - International Affairs, Aviation Security
• Civil Aviation Safety Authority - Regulation
  (Parastatal)
• Air Services Australia - Parastatal Agency
• Bureau of Air Safety Investigations - Parastatal
• National Airports - Recently Privatized (except
  SYD)
• - Consortia of Investors incl. Foreign Airports
  BAA AMS
• Other Airports - Municipal Private

17
Restructuring Civil Aviation Administration

• Developed Nations - New Zealand
• Civil Aviation Authority - Regulation
  (Parastatal)
• Airways Corporation - ATS (Corporation)
• National Airports
• - Initially corporatized within government
• - Now privatized - major investors or public
  shares

18
Restructuring Civil Aviation Administration

• Developed Nations - Canada
• Transport Canada - Regulation (Government Dept)
• Transportation Safety Board - Accident
  Investigation
• NAVCANADA - ATS/ANS (Not-for-profit Corporation)
• National Airports - Devolution to Local Levels
• - Primary now Airport Authorities (NFP
  Corporations)
• - Lower Level transferred to Local Authorities
  etc.

19
Restructuring Civil Aviation Administration

• Developing Nations - Botswana
• Department of Civil Aviation (Government)
• 950 staff - 6 Divisions 4 Administrative
  Sections
• Reliance on services bought-in from Government
• Confused divisional roles cost structure
• All revenues to National Treasury
• Restructuring with ICAO assistance

20
Source Feasibilty Study for Establishment of a
Civil Aviation Authorityt ICAO
TCB BOT / 92 / 001 Sypher
Mueller International Inc AirPlan Aviation
Technical Services Inc
21
Restructuring Civil Aviation Administration

• Developing Nations - Botswana
• Recommended restructure as parastatal CAA
• ICAO managed project
• 4 options examined
• Parastatal Civil Aviation Authority preferred
• Responsible for all functions
• Revenues to be retained by CAA
• Staffing reduced to 917 in 5 Directorates

22
Source Feasibilty Study for Establishment of a
Civil Aviation Authorityt ICAO
TCB BOT / 92 / 001 Sypher
Mueller International Inc AirPlan Aviation
Technical Services Inc
23
Restructuring Civil Aviation Administration

• Developing Nations - Kingdom of Jordan
• Civil Aviation Administration (Government)
• 1480 staff - 20 Departments
• Theoretically profitable due to overflight
  revenues
• All revenues to National Treasury
• Inadequate budget to maintain infrastructure
• Restructuring under Canadian (CIDA) Funding

24
Source Feasibilty Study for Restructuring of a
Civil Aviation Authorityt
Architects Crang Boake Inc, Sypher Mueller
International Inc. and AirPlan
Aviation Technical Services Inc
25
Restructuring Civil Aviation Administration

• Developing Nations - Kingdom of Jordan
• Recommended restructure as corporate CAA
• Canadian funding for consultants
• 5 options examined
• Corporatized Civil Aviation Authority preferred
• Responsible for all functions
• Revenues to be retained
• Staffing down to 870 in 5 Business Units

26
Source Feasibilty Study for Restructuring of a
Civil Aviation Authorityt
Architects Crang Boake Inc, Sypher Mueller
International Inc. and AirPlan
Aviation Technical Services Inc
27
Implementing a Civil Aviation Authority

• Requires
• Proper study of options functions
• - full definition of CAA concept
• Review staffing develop job descriptions
• Establish salary scales benefit schemes
• 5-Year capital operating budget,
  implementation funding for transition process
• Prepare necessary legislation
• Appoint Facilitation Team to manage transition
  process

28
Restructuring Civil Aviation Administration

• Final Thoughts
• 1. Restructuring can be approached in stages
• 2. Can create Independent Authority first -
• devolve or privatize elements later - if
  appropriate
• 3. Many airports will likely never qualify as
  commercially self-sufficient - need to be
  retained in CAA or in Airports Authority for
  subsidy