Wednesday, 22 December 2010

Airport chaos shows what happens when you privatise monopolies

The Guardian's 'Comment is Free' carries an excellent article by Neil Clark examining the connection between the privatisation of Britain's airports and the chaos at London's Heathrow and other airports faced with the bad winter weather. We reproduce extracts below and readers are urged to read the whole article.

There is, however, one important point in addition to those made by Neil Clark. Airports are a classic case of privatisation of monopolies or quasi-monopolies. In most cities or regions there is only one airport, even in a very large city such as London, where there is more than one airport, Heathrow is entirely dominant, and, because of the times involved in long flights, there are for a large number of journeys no practical alternative to going by air.

There is nothing whatever in economic theory that indicates that a private sector monopoly will do anything other than deliver an overpriced service - which can be either good quality service provided at an excessively high price, a low quality service delivered at an average price, or a low quality service provided at a high price. The privatisation of airports shows this reality vividly.

Due to the necessary dynamics of private sector monopolies, a monopoly needs to be taken into the public sector where it can be subject to public control. Even then, of course, there will be a tough fight to deal with bureaucracy and temptations to monopolistic behaviour by the management etc but at least serious tools exist to deal with the situation via public accountability. A private sector monopoly, as Neil Clark illustrates, is merely a formula for price gouging and low quality services.

A large amount of infrastructure is in the monopoly category, and that is why Neil Clark is entirely correct in showing why much infrastructure needs to be publicly owned.

Neil Clark writes:
"... The privatisation of the state-owned British Airport Authority (BAA), we were told, would ensure that "better services are provided for all airline passengers".

"I wonder if the Earl of Caithness [the Minister for Introducing the measure] (or even Margaret Thatcher herself), would have the courage to pop down to Hounslow and tell that to the tens of thousands of holidaymakers stranded at the BAA-owned Heathrow airport for the past three days. Even before this week's events, our privatised airports, with their shortage of public seating, their lack of reasonably priced food and drink outlets, and their depressing, unfriendly atmosphere, were an international disgrace.

"But their spectacular failure to adequately deal with recent snowfalls has surely exposed to all but the most fanatical free marketeers, the enormous price we pay for having our infrastructure in private ownership.

"Writing in the Guardian in 2007, the designer Sir Terence Conran told a story that illustrates perfectly the difference between the ethos of a publicly owned infrastructure company and a privately owned one.

"Conran revealed that when he was working on the design of the state-owned Heathrow Terminal 1 and the North Terminal of Gatwick airport in the 1960s, he was pressed to make sure that he provided "lots of seating" for the public. Conran contrasted... the much more commercial attitude of BAA today, where "every square inch must be turned over to retail space".

"the privately owned BAA is seemingly guided by just one concern: maximising profits for its Spanish-owned parent company, Ferrovial. That means out with public seating areas, and in with forcing people to pay to sit down in rip-off cafes and restaurants. And it also means, as we saw this week, not ordering anywhere near enough snow ploughs to keep the runways open in the case of extreme weather. BAA is on course to post record profits of over £1bn this year – yet only spent £500,000 on materials and equipment to help clear the runways...

It's revealing that one major airport in Britain that does manage to keep its passengers happy is one which is in full public ownership. Manchester airport, owned by local councils, was crowned best regional UK airport earlier this year and currently holds four out of the five major travel awards in the airport industry."
via www.guardian.co.uk

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