Gary airport privatization could fly, experts say

2013-04-02T17:00:00Z 2013-04-03T17:40:09Z Gary airport privatization could fly, experts sayKeith Benman, (219) 933-3326

A lack of any track record for keeping passenger service at Gary/Chicago International Airport will make any privatization deal there a highly speculative one for investors, according to national experts.

Most successful airport privatization projects have taken place at airports that already were profitable, so investors will have little to go on when evaluating possible investment in Gary, according to Robert Poole, founder of the Reason Foundation.

"That's the big question mark," Poole said. "That's a big question mark for bidders."

Noted aviation consultant Michael Boyd, chairman of Boyd Group International, calls the Gary airport a "green field" opportunity because of the lack of track record. Private investors may be interested in establishing businesses there other than commercial passenger service, including airplane maintenance, aircraft refurbishing, or cargo operations, Boyd said.

Landing more passenger flights would be a matter of finding the right "niche," such as charter or low-cost carriers.

"That airport is an asset," Boyd said. "It's a huge asset. It's a huge springboard, and I think the community and the region now realize that."

Those assessments of Gary's privatization efforts come as investment community interest in the airport grows. A joint city/airport committee is readying a recommendation that a broad-based request be issued for proposals for accelerating development at the airport.

Experts interviewed this week and others weighing in previously said the Gary airport authority and city cannot expect much, if any, upfront payment for leasing the airport or its facilities. But they can expect an increase in the airport's growth potential if investors roll up their sleeves and put their financial muscle to work.

"Gary shouldn't be looking for panaceas," said Joseph Schwieterman, head of DePaul University's Chaddick Institute for Metropolitan Development. "It's been taken down the primrose path to many times. They should keep it gradual."

Nearby Midway International Airport in Chicago already is well along the path to privatization, with 16 potential bidders in February expressing interest. But Boyd, Poole and others said that should have little effect on Gary's plans.

The Gary airport currently only has two regularly scheduled passenger flights per week, with Allegiant flying roundtrip between Gary and Sanford, Fla. Half a dozen airlines have come and gone in the past 15 years.

Guggenheim Managing Partner Ramiro Albarran told the joint city/airport committee in March any solicitation needs to be backed up by political will. Guggenheim Partners is a Chicago-based investment firm with more than $170 billion under management worldwide.

"The combination of the two is when folks roll up their sleeves and move forward," he said.

The airport authority and Gary Mayor Karen Freeman-Wilson believe with the $166 million runway expansion slated for completion this year, the time may have arrived to test the market.

The mayor told a meeting of the joint committee two weeks ago a lack of progress at the airport has left her open to a management agreement, a lease agreement or other options for spurring on development there.

"We just were not getting to where we needed to go as expeditiously as I thought we could," she said.

Short of a lease of the entire airport, there are a number of public-private partnerships models that could spur development at the Gary airport, Poole said.

"If I were doing this, I would look to see if there are niche markets that aren't being served by Midway or O'Hare," he said.

Poole was an adviser to Gov. Mitch Daniels on the 75-year lease of the Indiana Toll Road in 2006. He is transportation policy director at the Reason Foundation, a libertarian group that has advocated for privatization in all transport sectors.

The destination airport for Gary's Allegiant flights is a prime example of seizing opportunity in a niche market, Poole said. In the mid-1990s an investment group built a private international charter terminal at the Sanford airport. That made the until-then lightly used airport a destination for charter flights from the United Kingdom. 

That investment group went bust, but both the international and domestic terminals are now run by TBI Airport Management Inc., a subsidiary of Abertis Airports, of Spain. Those terminals handled close to 1.8 million passengers last year.

A private investor will be able to make hard, swift decisions like the above, which are inherently more difficult for government bodies to make, Boyd said.

The firm Boyd chairs, Boyd Group International, performed an economic benefit analysis for the Gary airport seven years ago that showed flying 250,000 passengers per year out of Gary would create about 400 jobs in and around the airport.

"The airport is doing what it has to do, which is move forward with new ideas," Boyd said.

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