Privatizing BWI

Dennis Lane blogs about the possible privatization of BWI airport and suggests this doesn’t make sense since the airport generates positive revenue for the State of Maryland. This isn’t quite true.

The Maryland Aviation Commission reports revenue and expenses for FY2008 and FY2007 on their website. Generally, airport revenue and expenses are attributed to the Transportation Trust Fund (certain fees go in and out of a general fund). In 2007, BWI and Martin airports lost $25M in FY2007 and earned $3M in FY2008. And this does not include capital expenditures, which I am not going to sort through since they are collected in the Maryland budget. Income is broken down by airport, though expenses are not, so it is difficult to determine exactly what BWI’s financial position would be independently. However, it is clear BWI’s profits are not going to be a barn-burner unless costs can be cut across the entire enterprise and/or a better management agreement is negotiated with BAA Maryland, which manages the airport on behalf of the Maryland Aviation Administration. This is unlikely given BAA’s ongoing tenuous financial position.

Regardless, BWI is an interesting candidate for privatization. Selling off assets in a downturn is difficult to recommend as the State of Maryland will likely use the proceeds to offset costs in the operating budget. Sell it and spend it budgeting does not bode well for the future. The state would be better off selling the airport to a private interest or on public markets and using the proceeds to recapitalize the woefully underfunded pension system.

BAA Maryland is a subsidiary of BAA Airports, the British firm that also manages Heathrow, Gatwick, and Stansted in London.