The following editorial appears in Friday’s Yomiuri Shimbun:

It is vital that airports are managed by using private-sector capital and methods to strengthen the international competitiveness of such facilities.

On Friday, the operations of Kansai Airport and Osaka Airport (also known as Itami Airport) were transferred to a private corporation called Kansai Airports, which was established by a consortium of companies including Orix Corp. and Vinci Airports S.A.S., a French corporation.

Ownership of facilities such as the runways and terminal buildings at both Kansai and Itami airports will be retained by New Kansai International Airport Co., a corporation fully funded by the central government. Operating rights for these facilities have been sold to Kansai Airports. This is the first time operations of an airport have been privatized, a policy the government has pushed as a major pillar of its economic growth strategy.

Kansai Airport is an aviation gateway to the Kansai region and was used by more than 10 million foreign visitors in 2015. We hope privatization will be a spur that further improves the convenience of this major airline hub.

The new company will operate the airports for a long 44 years. It has set a target of increasing passenger numbers and sales at both airports by 70 percent from the figures recorded in fiscal 2014, by the final year of the contract in fiscal 2059.

Profits can be increased by establishing hotels that offer cheap rates at the airports and reviewing the location of shops inside the terminal buildings. Reducing landing fees will attract new flight services and generate an increase in airport users. Vinci, which has such expertise, is involved in operating 33 airports, mainly in Europe.

Other sales in works

The key to whether privatization will be successful hinges on whether Vinci’s track record and connections with airline companies can help Kansai Airport gain more routes to Europe and the United States. Securing such routes has so far been an uphill battle.

The rights to run both airports were sold for a hefty ¥2.2 trillion. The minimum bid was set high because the government wants to repay debts of more than ¥1 trillion incurred in building Kansai Airport.

Throughout the period of the contract, Kansai Airports must continue to pay ¥49 billion each year to New Kansai International Airport.

Operating an airport is described as a business vulnerable to such factors as economic conditions, the spread of infectious diseases and terrorist attacks. Management capabilities will be tested over an operator’s ability to keep turning a profit without impairing services offered to airport users.

Privatization is planned for other Japanese airports. From July, the operation of state-run Sendai Airport will be taken over by a new company established by Tokyu Corp. and others.

The sale of operating rights also is being considered for New Chitose, Hakodate, Takamatsu, Hiroshima, Fukuoka and other airports.

Invigorating an airport will breathe new life into the region around it. Operating companies will need to tap the private-sector strength of rapid and flexible strategy so they can attract more tourists and business travelers. Close cooperation with local governments and travel agencies also will be essential.

The case of Kansai and Itami airports will be a litmus test for whether privatization will take root.

yomiuri-editorial-airports