Navigating U.S. airport P3s: Engaging stakeholders for sustained success
Exhibit 1 | Stakeholder Map for Different Approaches
In both cases, two key players emerge as having either high levels of influence or typically lower levels of support: the airlines and local community.
Sharing Profits with Airlines
Under the terms of the FAA Pilot Program, airlines have been granted significant power in U.S. P3s, as they ultimately approve or reject these transactions. To date, though, airlines have been lukewarm advocates of U.S. P3s, despite the significant benefits they stand to reap.
In the last five years, an informal template has emerged: in exchange for their approval, airlines expect to secure a fixed total price for a defined period of time, typically 10 to 15 years. For instance, as part of the failed Chicago Midway transaction, Southwest Airlines would have received an annual fixed price for using the airport, no matter how many operations or passengers are handled.
Chicago Midway is Southwest’s largest airport, and this deal would have meant that its costs there were dramatically lower than any other major station in its system—a great deal for the airline, but one that didn’t happen. The fixed-price arrangement at Luis Muñoz Marín International Airport in Puerto Rico, on the other hand, has been an outstanding one for JetBlue and American Airlines, the two dominant carriers at that airport.
So why aren’t airlines lining up for U.S. P3s? Airlines believe that, overall, they can receive a better deal under the current system of publically operated airports than under a P3 structure.
Airlines are understandably skeptical that the profit-driven private sector can deliver infrastructure and operations at a lower cost than the public sector. They see the initial fixed-priced period as a potentially limited-term introductory promotion, not a secure promise to keep costs down in the long run.
In order to help secure airline support, investors need to offer two key measures: transparency and revenue/profit sharing. Investors and vendors should be prepared to show airlines exactly how they can expect to realize revenue benefits and cost savings. Then, they should formalize those expectations by developing a long-term, profit-sharing agreement.
Demonstrating Value to the Local Community
Unlike airlines, the local community has no direct role in the U.S. P3 process, but that doesn’t dilute their influence, as they elect the local officials that often provide final approvals. While partial airport concessions potentially avoid the need for direct approval by local officials, and therefore indirectly the local community, securing the support of the local community is still essential. Here’s how:
Exhibit 2 | Value for Local Electorate
First and foremost, the community needs to feel that their views have been heard and reflected in the process, from start to finish. Identifying areas of both opposition and support and then developing and communicating a value proposition that addresses these is key.
Any plans to expand the airport facilities and increase traffic volumes will naturally lead to fears of increased noise and environmental disruption. While increasing traffic may be a key part of an investor’s financial case, it is important to balance this against the concerns of the community. Offering (and publicizing) clear commitments on caps and noise levels is one potential solution.
|Demonstrate economic value||
Many transactions create opportunities for the local economy (e.g., the creation of jobs through large-scale construction programs to avoiding the need to raise taxes in order to fund local government budget shortfalls). These benefits should be quantified and publicized (e.g., through an economic impact or workforce study).
|Provide assurances around fees||The local community may be nervous about the profit-driven motives of private investors and the higher user costs of expansion plans. In the same way transparency is required with airlines, bidders should also be transparent with the community on potential cost increases.|
Non-U.S. investors need to demonstrate that they understand the unique cultural, political, and financial realities of the U.S. market. This can be helped by either establishing a local presence or involving a local partner that can demonstrate their connections to and knowledge of the local market.
Above all else, investors need a well-developed community outreach plan that enables them not only to monitor community sentiment but also to engage and respond quickly.
Traditional approaches to community engagement (e.g., town hall sessions) have had limited success and don’t reach the whole community. ICF Next, our global marketing services agency, recommends adopting a more dynamic and targeted approach to outreach plans. In particular, research-driven engagement and social media enable parties to monitor online conversations in real-time, respond quickly, and adapt offerings accordingly.
Finding Common Ground
Reaching a consensus in the face of competing interests requires careful management, but it is possible. The first rule when it comes to finding that common ground? Get back to the basics.
For airlines, we have identified two basic principles: transparency and revenue/profit sharing. For the local community, it’s about effective engagement by being authentic and empathetic. If you would like to find out more about ICF’s thoughts on any of the topics discussed, please do not hesitate to get in touch.