Air Transport Sector Restructuring

Victor Craig

Director Air Transport

Halcrow AirPlan - Malaysia

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”

Air Transport Sector Restructuring

Who are the Principal Candidates ?

• National Air Carriers

• Civil Aviation Administrations

• Airport Administrations

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

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

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

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)

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

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

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)

Restructuring Civil Aviation Administration

Restructuring in Other Countries

Developed Nations

UK, Australia, New Zealand, Canada

Developing Nations - 2 Examples

Botswana (Africa) & Jordan (Middle East)

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

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

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

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.

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

Source : Feasibilty Study for Establishment of a Civil Aviation Authorityt

ICAO : TCB : BOT / 92 / 001

Sypher : Mueller International Inc & AirPlan Aviation Technical Services Inc

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

Source : Feasibilty Study for Establishment of a Civil Aviation Authorityt

ICAO : TCB : BOT / 92 / 001

Sypher : Mueller International Inc & AirPlan Aviation Technical Services Inc

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

Source : Feasibilty Study for Restructuring of a Civil Aviation Authorityt

Architects Crang & Boake Inc, Sypher: Mueller International Inc.

and AirPlan Aviation Technical Services Inc

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

Source : Feasibilty Study for Restructuring of a Civil Aviation Authorityt

Architects Crang & Boake Inc, Sypher: Mueller International Inc.

and AirPlan Aviation Technical Services Inc

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

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