Cost and Cost Politics in Airport Takeovers: Two Cases From North Carolina

Introduction

Airport governance changes, such as converting municipally run airports to regionally governed airport authorities¹, are often thought to increase financial and resource efficiency (Oum, Yan, & Yu, 2008; Craig et al 2012). Globally, ownership by the private sector of airports may increase efficiency through better management. In the United States commercial service airports are owned by the public sector, primarily by municipal governments or by local authorities (Bacot & Christine, 2006). By being more efficient with regional airport infrastructure and potentially providing a lower cost of management, governance changes may make airport infrastructure more sustainable. However, little is known about airport financial management in the scholarly literature and discussions of how costs are perceived provides some indication of the possibilities and problems associated with this potential sustainability strategy.

While efficiency and sustainability are ostensible reasons for governance changes, there are often historical and political reasons for an airport’s governance structure. A city or a county may have originally built the airport, which means that this entity often controls it. The reasons for a change of governance to these large and important assets is likely to be at least as political as it is based upon economic and accounting reasons. When governance changes are forced on a city by its state, we call this a takeover of the airport. Especially in non-home-rule or weak home-rule states, the state can take over a municipal airport, which it could then run itself or it could give it to a local authority. In the literature, it is unclear what financial considerations are given to these governance changes. To address this issue we ask the following research question: what costs and financial considerations are discussed in airport takeovers? Specifically, are the indirect costs associated with airport management like airport security, emergency response, and other administrative indirect costs a factor in the governance decision?

To address these research questions, this chapter looks at the costs discussed and the cost politics associated with a government airport takeover attempt by the State of North Carolina of Charlotte-Douglas Airport (CLT). It then applies the findings to the case of the Asheville Regional Airport (AVL) to see whether costs were important in that takeover attempt. Both airport takeovers were attempted by the North Carolina General Assembly between 2012 and 2014. CLT is the ninth largest airport in the United States and a hub airport for American Airlines, currently the largest airline in the world in terms of passengers (FlightGlobal 2017). While the General Assembly did pass legislation to take the airport from the City of Charlotte, this attempt was blocked in court. AVL is a regional airport, and the General Assembly was successful in changing the governance structure in this case. The chapter examines the statements made in the North Carolina media and in technical documents concerning the costs of the airports. This case represents a pathway case study (Gerring, 2007) of the politicization of costs in the relatively technical area of accounting and financial management of airports.

The chapter makes three important contributions to the study of government financial management and transportation. First, it shows that costs were important to the discussion of both takeover attempts. Second, it discusses the costs that were relevant in each case. Third, it provides more research on cost accounting and indirect costs in the United States, which is an area that is severely underdeveloped and in need of scholarship (Rivenbark, 2005; Mohr, 2017). Beyond merely technical issues, the process of how costs are discussed in the public is a fascinating part of the policy process and deserves more attention in scholarship.