In contrast to the privatization and regulatory reforms currently underway at European airports, airports in the US remain publicly owned. There, airports negotiate legally binding contracts with airlines and finance large investment projects with revenue bonds. Applying insights from transaction cost economics, we argue that the observed variation in contractual and financing arrangements at US airports corresponds to the parties’ needs for safeguarding and coordination. The case evidence presented reveals that public owners set the framework for private investments and contracting. Airline contracts and capital market control result in efficient investment and act as a check on the cost inefficiency typically linked to public ownership.
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Paper provided by Center for Network Industries and Infrastructure (CNI) in its series Working Papers with number
2007-02.
Find related papers by JEL classification: L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out
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