Airports economics in latin america and the caribbean world bank

DIRECTIONS IN DEVELOPMENT
Infrastructure
Airport Economics in Latin
America and the Caribbean
Benchmarking, Regulation, and Pricing
Tomás Serebrisky
PublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorizedblicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorizedblicDisclosureAuthorized 66236

Airport Economics in Latin America
and the Caribbean

Airport Economics in Latin
America and the Caribbean
Benchmarking,Regulation,and Pricing
Tomás Serebrisky

©2012InternationalBankforReconstructionandDevelopment/InternationalDevelopment
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v
Preface xiii
Acknowledgments xvii
About the Author xix
Abbreviations and Acronyms xxi
Overview 1
The Air Transport Sector 2
Investment in the LAC Airport Sector 4
Summary of This Report 6
Conclusions 16
Note 19
References 20
Chapter 1 Recent Evolution of the Air Transport Sector 21
Latin America and the Caribbean Overview 26
Notes 34
References 34
Chapter 2 Investment in the Airport Sector 35
Private Project Financing in the Airport
Sector Worldwide 42
Contents

vi Contents
Private Investments in the Airport Sector in
Developing Countries 44
Private Investment in the Airport Sector in
Latin America and the Caribbean 49
Conclusions 52
Notes 53
References 54
Chapter 3 Efficiency Estimation 55
Partial Performance Indicators in LAC Airports:
Cross-Comparison for 2005 60
Partial Performance Indicators: Time Series 84
Measuring Technical Efficiency of Airports
in LAC Countries 111
Conclusion 130
Notes 132
References 135
Chapter 4 Institutional Design and Governance of
Airport Regulators in Latin America 137
Literature Review 139
Methodology and Data Sources 141
Regulatory Governance 143
Economic Regulation 157
Conclusions 161
References 163
Chapter 5 Benchmarking of Aeronautical Charges at
Latin American Airports 165
Overview 165
Methodology 167
Conclusion 195
Notes 197
References 198
Appendix A Survey of Airport Performance for Operators 199
Appendix B Governance of Airport Regulators Survey 209
Appendix C Technical Efficiency Calculation 237

Contents vii
Appendix D Data Sources 245
Air Transport Research Society (ATRS) 245
Airports Council International (ACI) 246
Private Participation in Infrastructure
Database (PPI) 246
Dealogic ProjectWare Database 247
Asociación Latinoamericana de Transporte
Aéreo (ALTA) 248
Airport Charges 249
Figures
1 Air Transport Sector Demand and World GDP,
1980–2008 2
2 Domestic and International Passenger Share, 2008 3
3 Partial Performance Indicator: Passengers
per Employee, 2005 8
4 Evolution of Turnaround Costs for an Airbus A320,
1995–2009 15
5 Structure of Turnaround Costs for an Airbus A320 17
1.1 Growth Rates in the Air Transport Sector and Global
GDP, 1980–2008 22
1.2 Passenger Traffic Growth, by Region, 2007 and 2008 23
1.3 Domestic and International Passenger Share, 2008 24
1.4 Volume of Cargo Moved, by Region, 2008 25
1.5 Aircraft Movements, by Region, 2008 26
1.6 GDP Growth and Passenger Growth in LAC,
1995–2008 27
2.1 Project Financing in the Airport Sector by Number
of Projects, Total Project Amount, and Region,
1996–2008 43
2.2 Share of Project Financing in the Airport Sector,
by Region, 1996–2008 44
2.3 Private Investment Commitments to Infrastructure
Projects in Developing Countries, by Sector, 1990–2008 47
2.4 Investment Commitments to Transport Projects with
Private Participation in Developing Countries,
by Subsector, 1990–2008 48
2.5 Total Investment Commitments to Airport Projects
with Private Participation in Developing Countries,
by Region, 1991–2008 49

viii Contents
2.6 Investment Commitments to Airport Projects
with Private Participation in Developing Countries,
by Type of Project, 1991–2007 50
2.7 Investment Commitments to Transport Projects with
Private Participation in Latin America and the Caribbean,
by Subsector, 1990–2008 51
2.8 Investment Commitments to Airport Projects with
Private Participation in Latin America and the
Caribbean Countries, by Type of Investment,
1993–2008 52
3.1 Passengers per Aircraft Movement, 2005 63
3.2 Cargo per Aircraft Movement, 2005 65
3.3 Passengers per Employee, 2005 67
3.4 Aircraft Movements per Runway, 2005 68
3.5 Labor Costs as a Share of Operating Costs, 2005 70
3.6 Labor Cost per Passenger, 2005 71
3.7 Operating Costs per Passenger, 2005 73
3.8 Operating Costs per Aircraft Movement, 2005 75
3.9 Total Revenue per Passenger, 2005 76
3.10 Aeronautical Revenue Share, 2005 78
3.11 Aeronautical Revenue per Aircraft Movement, 2005 79
3.12 Passengers per Boarding Bridge, 2005 81
3.13 Passengers per Square Meter of Terminal Area, 2005 82
3.14 Evolution of the U.S. Dollar–Euro Exchange Rate,
1999–2009 89
3.15 Passengers per Employee 91
3.16 Labor Costs per Passenger 95
3.17 Operating Costs per Passenger 98
3.18 Total Revenue per Passenger 102
3.19 Total Revenue per Employee 105
3.20 Passengers per Boarding Bridge 108
3.21 DEA-CRS and DEA-VRS Frontiers 113
3.22 Malmquist Index of Total Factor Productivity Change 125
4.1 Decision-Making Autonomy 146
4.2 Appointment Authorities 147
4.3 Budget Composition 149
4.4 Procedure to Remove Decision Makers 150
4.5 Reasons Directors Leave Positions 151
4.6 Bureaucratic Quality 152
4.7 Bureaucratic Quality by Type 153

Contents ix
4.8 Transparency in Airport Regulators 155
4.9 Transparency by Type 156
4.10 Dimensions of Accountability in Airport Regulators 157
4.11 Dimensions of Accountability in IRAs and Non-IRAs 158
5.1 Landing Fees for an Airbus A320, Daylight Operation 170
5.2 Landing Fees for an Airbus A320, Night Operation 171
5.3 Changes in Landing Fees for an Airbus A320, Daylight
Operation 172
5.4 Landing Fees Percentage Change for an Airbus A320,
Daylight Operation 174
5.5 Parking Charge for an Airbus A320, for 2 Hours 175
5.6 Changes in Parking Charges for an Airbus A320,
for 2 Hours 176
5.7 Landing Fees and Parking Charge for an Airbus A320,
for 2 Hours, 2009 178
5.8 Landing Fees and Parking Charge for an Airbus A320,
for 2 Hours, 1995–2009 179
5.9 Boarding Bridge Charges for an Airbus A320,
for 2 Hours, 2009 180
5.10 Boarding Bridge Charges for an Airbus A320,
for 2 Hours, 1995–2009 182
5.11 Passenger Charges per Passenger (Charges Levied
by the Airport) 183
5.12 Charges and Taxes Levied on Passengers, per Passenger 184
5.13 Changes in Passenger Charges per Passenger
(Charges Levied by the Airport) 187
5.14 Turnaround Costs for an Airbus A320 (2 Hours,
Daylight Operation) 188
5.15 Changes in Turnaround Costs for an Airbus A320
(2 Hours, Daylight Operation) 190
5.16 Turnaround Costs for a Boeing 767-300 (2 Hours,
Daylight Operation) 191
5.17 Changes in Turnaround Costs for a Boeing 767-300
(2 Hours, Daylight Operation) 192
5.18 Turnaround Costs Levied on Airlines for an Airbus
A320 (2 Hours, Daylight Operation) 193
5.19 Changes in Turnaround Costs Levied on Airlines
for a Boeing 767–300 (2 Hours, Daylight Operation) 194
5.20 Turnaround Costs Levied on Passengers, for an
Airbus A320 196

x Contents
Tables
1 LAC Region’s Share of the Air Transport Sector, 2008 4
2 Private Investment Commitments to the Airport
Sector in the LAC Region, 1993–2008 5
3 Criteria for Determining Regulatory Agency
Governance Ratings 12
1.1 Latin America and the Caribbean Snapshot of the
Airport Sector, 2008 29
1.2 Global and LAC Airports Ranking: Passengers, Cargo,
and Aircraft Movements, 2008 30
1.3 LAC Airport Ranking (Top 10) by Cargo, 2008 33
1.4 LAC Airport Ranking (Top 10) by Aircraft
Movements, 2008 33
2.1 Latin American and Caribbean Airports by Type
of PSP Arrangement 36
2.2 Total Project Financing in the Airport Sector
by Income Level, Region, and Country, 1996–2008 45
3.1 Partial Performance Indicators Commonly Used
in the Airport Sector 57
3.2 Latin American and Caribbean Airports Sampled 61
3.3 Summary of Airport Partial Performance
Indicators—Top and Bottom Performers, 2005 85
3.4 Descriptive Statistics by World Region, 2005–06 115
3.5 Average Technical Efficiency Scores and Scale
Efficiency by Region, 2005–06 115
3.6 Average Technical Efficiency Scores for LAC
Airports, 2005–06 117
3.7 Peer Analysis, DEA VRS, 2005 119
3.8 Potential Explanatory Factors of Technical
Inefficiency, 2005–06 121
3.9 Truncated Regression—Marginal Effects 123
3.10 Descriptive Statistics by Period 126
3.11 Average Annual Total Factor Productivity by Airport
and Subperiod 127
3.12 Average Total Factor Productivity by Airport Categories 129
3.13 Malmquist Total Factor Productivity Index
Decomposition—Averages by Period 130
4.1 Aspects of Governance of Airport Regulators 142
4.2 Mapping of Regulator and Legal Configuration 144

Contents xi
4.3 Answers to Selected Questions on Economic
Regulation in the Airport Sector 160
5.1 Airport Sample Used for the Aeronautical Tariff
Benchmarking Analysis 166
5.2 Key Parameters of the Aircraft Used in the Analysis 168
5.3 Passenger Charges and Taxes per Departing Passenger 185
C.1 Results for the Technical Efficiency Scores for All Airports
Other Than Latin American Airports 237
C.2 LAC Airports Total Factor Productivity Change 241
C.3 Average Technical Efficiency Scores and Scale Efficiency
by Region (2005–06 average) 243

xiii
Expanding and enhancing the provision of air transport infrastructure has
become an increasingly important policy issue on the development
agenda of both high-income and developing countries. The growth of air
transport demand, along with the associated need to have efficient airport
infrastructure to support it, has prompted the need to evaluate the effects
of ownership schemes and regulation on airport performance.
Traditionally, air transport infrastructure was exclusively under govern-
ment ownership and management in the Latin America and Caribbean
(LAC) region. Starting in the late 1990s, private capital flows began to
play an increasingly important role through the financing of air transport
sector infrastructure and the management of airport operations.The intro-
duction of private sector participation responded to myriad policy objec-
tives, including bringing innovation and efficiency to the management of
airports and boosting resources to finance the growing demand for airport
infrastructure expansions and maintenance. In this context, governments
have undertaken important institutional and regulatory reforms, which in
several countries have resulted in the separation of planning and policy
formulation functions from the day-to-day operation of airports through
the establishment of independent regulatory agencies.
As a global pioneer in the introduction of private sector participation
in air transport infrastructure, the LAC region serves as an informative
Preface

xiv Preface
context through which to investigate the evolution of performance in the
airport sector and answer a series of pertinent policy questions: Are LAC
airports technically efficient? How has efficiency evolved in the past
decade? Are privately run airports more efficient than state-operated air-
ports? How do independent regulators compare with government agen-
cies in accountability, transparency, and autonomy? How have the level
and structure of airport tariffs changed in recent years?
Purpose of the Report
This report presents the findings of a first-ever, comprehensive study of
how LAC region airports have evolved during a notable period of transi-
tion in airport ownership. It is an unbiased, positive analysis of what hap-
pened, rather than a normative analysis of what should be done to reform
and to attract private sector participation to the airport sector. It takes the
first step to respond to the need for more conclusive information about
the influence of airport ownership on economic performance. The report
centers on the study of three dimensions of performance: productive effi-
ciency, institutional setup for the governance of the sector, and financing.
Structure of the Report
This multifaceted report uses a range of advanced quantitative and
qualitative methods to assess the relationship between airport ownership
and performance in the LAC region. After a comprehensive overview,
chapters 1 and 2 provide the necessary background for the air transport
sector and the evolution of private sector participation and investment in
airport infrastructure. In chapter 3, questionnaires submitted to airport
operators and regulators led to the creation of the unique data sets, which
were first used to compare performance across 14 partial performance
indicators, and next used to develop aggregate measures of efficiency
necessary for the benchmarking exercise. In chapter 4, a qualitative study
of the relationship between type of regulating agency (independent or
government-led) and transparency, accountability, and bureaucracy pro-
vides insight into how recent reforms have also affected the quality of
regulatory governance. Chapter 5 provides an in-depth analysis of the
evolution of tariff structures in the region as compared to a sample of
international airports.
Although this report considers Latin America and the Caribbean as its
focal region, the questions raised, and the analytical tools employed to

Preface xv
respond to those questions, may be applied to other regions. In the future,
researchers seeking to evaluate the productive performance of airports
can use this study as a guide to anticipate potential challenges as well as
to develop successful strategies to overcome them. Several important
topics were not included in this report but should be the focus of future
research. In particular, the evolution of the quality of services in airports
deserves greater attention, as airports are increasingly becoming business
centers and key gateways for trade competitiveness.The other main topic
that requires detailed practical research is climate change and its relation-
ship with the airport sector.

xvii
This study was produced by a task team led by Tomás Serebrisky, of
the Sustainable Development Department in the Latin America and
the Caribbean Region of the World Bank. Members of the core team
were Sebastián López Azumendi, Matías Herrera Dappe, Raquel
Fernandez, and Juan Matías Ortner. The early preparatory stages of the
report benefited from inputs and advice provided by Raúl Medina
Caballero (Ministry of Transport, Spain).
The study was conceived by a group that included Tomás Serebrisky,
Luis Andrés, and José Luis Irigoyen of the World Bank.
Several individuals contributed to the preparation of the report,
including Sebastián López Azumendi (analysis of governance of airport
regulators), Sergio Perelman (calculation of aggregate measures of techni-
cal efficiency), and Andy Ricover (benchmarking of airport tariffs).
Diana Cubas, Gwyneth Fries, and Sivan Tamir edited the report and
provided suggestions on improving its organization.
The report benefited extensively from discussions and feedback pro-
vided by Jean François Arvis, Raúl Medina Caballero, Baher El-Hefnawy,
Antonio Estache, Shomik Raj Mehndiratta, Aurelio Menéndez, Charles
Schlumberger, and Jordan Schwartz.
Acknowledgments

xviii Acknowledgments
The author would like to express his gratitude to all individuals
responding to the questionnaires. Regulators and airport operators spent
valuable time completing the questionnaires and addressing in detail the
follow-up clarifications.
Financial support for the preparation of this report was provided by
the Public-Private Infrastructure Advisory Facility (PPIAF).

xix
Tomás Serebrisky received a Ph.D. in economics from the University of
Chicago in 2000. From 2000 to 2002 Mr. Serebrisky worked in Argentina
as the Chief Economist of the Antitrust Commission and as a Professor
in Universidad Torcuato Di Tella. In 2002 he joined the World Bank and
is currently working as Senior Infrastructure Economist in the Latin
American Region. His areas of expertise are the economics of infrastruc-
ture investments, public-private partnerships, logistics, economic regula-
tion, and antitrust. Mr. Serebrisky has published extensively in refereed
journals, including: Journal of International Economics, Transport Reviews,
Journal of Maritime Policy and Management, Telecommunications Policy,
Journal of Air Transport Management and World Competition.
About the Author

xxi
ACI Airports Council International
AIP Aeronautical Information Publication
ALTA Asociación Latinoamericana de Transporte Aéreo (Latin
America and the Caribbean Air Transport Association)
ANAC Agencia Nacional de Aviação Civil (National Civil
Aviation Agency of Brazil)
ATI air transport infrastructure
ATM air traffic movement
ATRS Air Transport Research Society
BOT build, operate, and transfer
BROT build, rehabilitate, operate, and transfer
CAA Civil Aviation Authority, Panama
CPI Consumer Price Index
CRS constant returns to scale
DEA data envelopment analysis
DINACIA Dirección Nacional de Aviación Civil e Infraestructura
Aeronaútica (Uruguay)
IATA International Air Transport Association
ICAO International Civil Aviation Organization
INFRAERO Empresa Brasileira de Infra-Estrutura Aeroportuaria
(Brazilian Airport Administrator)
Abbreviations and Acronyms

xxii Abbreviations and Acronyms
IRA independent regulatory agency
IRR internal rate of return
LAC Latin America and the Caribbean
MTOW maximum takeoff weight
OECD Organisation for Economic Co-operation and
Development
PPI Private Participation in Infrastructure (World Bank
database)
PPIAF Public-Private Infrastructure Advisory Facility
PSP private sector participation
RFI Regulatory Framework Index
RLT rehabilitate, lease or rent, and transfer
ROT rehabilitate, operate, and transfer
SFA Stochastic Frontier Analysis
TC technical change
TE technical efficiency
TEC technical efficiency change
TFP total factor productivity
TFPC total factor productivity change
VRS variable returns to scale
WLU workload unit

Abbreviations and Acronyms xxiii
Airport Codes
AEP Aeroparque Jorge Newbery, Buenos Aires, Argentina
ASU Silvio Pettirossi International, Asunción, Paraguay
ATL Hartsfield-Jackson Atlanta International, United States
BAQ Ernesto Cortissoz International, Barranquilla, Colombia
BOG El Dorado International, Bogotá, Colombia
BSB Presidente Juscelino Kubitschek International, Brasilia,
Brazil
CCS Simón Bolivar International, Caracas, República
Bolivariana de Venezuela
CDG Charles de Gaulle International, Paris, France
CGH Congonhas International, São Paulo, Brazil
CLO Alfonso Bonilla Aragón International, Cali, Colombia
CUN Cancún International, Cancún, Mexico
EZE Ministro Pistarini International, Buenos Aires, Argentina
FRA Frankfurt am Main International, Frankfurt, Germany
FTE El Calafate Airport, Argentina
GDL Miguel Hidalgo y Costilla International, Guadalajara,
Mexico
GIG Antonio Carlos Jobim International (Galeão), Rio de
Janeiro, Brazil
GRU Governador André Franco Montoro International,
Guarulhos, São Paulo, Brazil
GUA La Aurora International, Guatemala City, Guatemala
GYE José Joaquín de Olmedo International, Guayaquil,
Ecuador
ICN Seoul Incheon International, Republic of Korea
JFK John F. Kennedy Airport, New York, United States
KIN Norman Manley International, Kingston, Jamaica
LAX Los Angeles International, Los Angeles, United States
LHR Heathrow International, London, United Kingdom
LIM Jorge Chávez International, Lima, Peru
LPZ El Alto International, La Paz, Bolivia
MAD Barajas International, Madrid, Spain
MAO Brigadeiro Eduardo Gomes International, Manaus, Brazil
MDE José María Córdova International, Medellín, Colombia
MEM Memphis International, United States
MEX Benito Juárez International, Mexico City, Mexico
MIA Miami International, Miami, United States

xxiv Abbreviations and Acronyms
MFM Macau International, Macao SAR, China
MGA Augusto C. Sandino International, Managua, Nicaragua
MTY General Mariano Escobedo International, Monterrey,
Mexico
MVD General Cesareo Berisso International, Carrasco,
Montevideo, Uruguay
NAS Lynden Pindling International, Nassau, The Bahamas
POS Piarco International, Port of Spain, Trinidad and Tobago
PTY Tocumen International, Panama City, Panama
SAL Comalapa International, San Salvador, El Salvador
SCL ComodoroArturo Merino Benítez International,Santiago
de Chile, Chile
SDF Louisville International, United States
SDQ Las Américas International, Santo Domingo, Dominican
Republic
SJO Juan Santamaría International, San José, Costa Rica
SNA John Wayne Airport, Santa Ana, United States
TGU Toncontín International, Tegucigalpa, Honduras
UIO Mariscal Sucre International, Quito, Ecuador
VCP Viracopos-Campinas International, São Paulo, Brazil
VVI Viru Viru International, Santa Cruz, Bolivia
XMN Xiamen Gaoqi International, China

1
Overview
As core components of the air transport sector, airports play a key role in
catalyzing social and economic development at the regional, national, and
global levels. As a dynamic service industry with multiple inputs and out-
puts, the airport sector facilitates domestic and international trade (by
providing access to markets); creates employment opportunities related to
both aeronautical and nonaeronautical activities; and enhances communi-
cation and integration between people, countries, and cultures through
tourism, business activities, and merchandise trade. Airports operate in
different environments (large cities, remote areas) and have users with
varying needs (business and leisure travelers), thus making efficiency
assessments very challenging. Multiple stakeholders, including airlines,
regulatory agencies, ground-handling companies, and many others, have
varied interests and objectives that further complicate an evaluation of
airport performance.
This overview includes developed countries, such as Japan and Australia, in the World Bank
regional designation of East Asia and Pacific.

2 Airport Economics in Latin America and the Caribbean
The Air Transport Sector
The air transport sector is uniquely volatile (figure 1). Over time, its fluc-
tuations have followed those of the global economy, though they have
been more intense. Heavily dependent on business activity, trade flows,
and tourism, the sector has experienced long periods of continued growth
alternated with brief crisis periods of negative growth.
This amplifying effect has meant that global crises, such as the 1979
oil crisis; the Gulf War in 1990; the terrorist attacks of September 11,
2001; and the 2008 global financial crisis had a profoundly negative
impact on the air transport sector as compared to other sectors of the
economy. Among relevant stakeholders in the air transport sector, air-
lines are particularly sensitive to severe global downturns. The progres-
sive liberalization of different aviation markets, notably in the European
Union and the United States in the late 1990s and 1970s, respectively,
led to an overall increase in competition and to narrower operating mar-
gins, which further increased the particular vulnerability of airlines.
Airports themselves, with facilities that can often be classified as natural
monopolies, are less sensitive to these effects.
The air transport sector (in terms of passenger and cargo demand) is
dominated by Europe and North America (Canada and the United States),
Source: World Bank estimation based on data from Airports Council International (ACI), International Air Transport
Association (IATA), and International Monetary Fund (IMF) data.
Figure 1 Air Transport Sector Demand and World GDP,1980–2008
–5
–3
–1
1
3
5
7
percent
9
11
13
15
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
passengers GDP per capita

Overview 3
which together account for more than 60 percent of the market (figure 2).
Airports handled 4.874 billion arriving and departing passengers in 2008,
of which approximately 2 billion were international and 2.8 billion were
domestic. Of these, North America (Canada and the United States) repre-
sented 48 percent of domestic traffic, while Europe represented more than
half of global international traffic. The share of passengers, and especially
Source: Author’s estimation based on ACI data.
Figure 2 Domestic and International Passenger Share,2008
a. Domestic passengers
(% of global share by region)
b. International passengers
Africa
2%
Middle East
1%
Asia-Pacific
26%
Europe
15%
North
America
48%
Africa
5%
Asia-Pacific
21%
Europe
53%
Latin America and
the Caribbean
6%
Middle East
5%
North
America
10%
Latin America and
the Caribbean
8%

Table 1 LAC Region’s Share of the Air Transport Sector,2008
Domestic passengers 224,531,098
Share of global domestic passengers 8%
International passengers 113,850,200
Share of global international passengers 6%
Total passengers 338,381,298
Share of global total passengers 7%
Growth rate of total passengers (2007–08) 8%
Cargo (metric tons) 4,589,092
Share of global cargo 5%
Growth rate of cargo (2007–08) 4%
Share of global aircraft movements 8%
Growth rate of aircraft movements (2007–08) 0%
Source: Author’s estimation based on Airports Council International data.
of cargo in North America and Europe, has fallen slightly (5 percent) since
2000, with the East Asia and Pacific region picking up most of the gains,
primarily because of the significant increase of air traffic demand in China.
In 2008, the East Asia and Pacific region accounted for 38 percent of the
cargo market (measured in volume), while North America was second
with 33 percent.
Latin America and the Caribbean (LAC) accounts for a small share of
the air transport sector worldwide. Based on 2008 figures, the region only
accounted for 7 percent of total passengers, 5 percent of cargo, and 8 per-
cent of aircraft movements (table 1). Airports are relatively small when
ranked on a global scale. LAC has a total of just 4 airports among the top
100 airports worldwide and 14 airports among the top 200. Aeropuerto
Internacional Benito Juárez in Mexico City, ranked 43rd globally, is the
most important airport in the region in terms of passenger traffic, han-
dling a total of about 26.2 million passengers in 2008 (approximately
three times less than the number handled by first-ranked Hartsfield-
Jackson Airport in Atlanta). As for cargo, the entire LAC region handled
a total of 4.6 million metric tons in 2008, only 1 million metric tons more
than the amount of cargo traffic handled by the global leader, Hong Kong
International Airport (3.6 million metric tons) and three times as much
as Miami, North America’s cargo hub (1.5 million metric tons).
Investment in the LAC Airport Sector
For much of the 20th century, commercial and business pressures were
weak within the airport sector since airports around the world were not
only owned and managed by governments, but also seen solely as public

Overview 5
utilities and strategic assets for national defense purposes. During the late
1980s and early 1990s, however, there was a slow shift toward a view of
airports as more commercially oriented enterprises. Consequently, several
countries introduced private sector participation (PSP) into the operation
of airports.
According to the ProjectWare database, US$64 billion in private
investment went to a total of 110 air transport infrastructure projects
between 1996 and 2008. Australia; Hong Kong SAR, China; and Turkey
led the globe over the studied time period, representing 57 percent of
total project financing. Australia has clearly been leading, with total proj-
ect financing of US$19,326 million, followed by Hong Kong SAR, China,
with US$11,050 million and Turkey with US$6,188 million. From 1993
to 2008, the private sector invested more than US$9.5 billion in the LAC
region’s airports. Argentina, Colombia, and Mexico together represented
almost 80 percent of total investments in the LAC region (table 2).
Compared to other regions, LAC was a pioneer in introducing PSP in
the airport sector, though the intensity of the process has decreased dra-
matically in recent years. According to the World Bank’s Private
Participation in Infrastructure (PPI) Database, which is perhaps the most
complete public source of information on private investment in infra-
structure, within just the developing world, the LAC region accounted for
30 percent of total investment commitments in the airport sector between
1991 and 2008. However, the relative share of total private investment in
Table 2 Private Investment Commitments to the Airport Sector
in the LAC Region,1993–2008
Country
Investments
(US$ millions) Share of total (%)
Mexico 3,223.9 33.9
Argentina 2,375.4 25.0
Colombia 1,224.3 12.9
Ecuador 665.0 7.0
Peru 430.0 4.5
Dominican Republic 350.0 3.7
Chile 345.0 3.6
Uruguay 195.0 2.0
Jamaica 175.0 1.8
Costa Rica 161.0 1.7
Venezuela, RB 134.0 1.4
Honduras 120.0 1.3
Bolivia 116.6 1.2
Source: Private Participation in Infrastructure (PPI) Database.

LAC fell from 70 percent of commitments in the late 1990s to only
12 percent between 2000 and 2008.The PPI database reports that invest-
ments in the airport sector in LAC peaked in 2006 with a total of
US$2,346 million, but fell to US$746 million in 2007 and US$231 mil-
lion in 2008. This reduction could be the result of the successful upgrade
of airport infrastructure, or it could also be that the region lost its attrac-
tiveness or that individual country governments have decided not to open
the sector for new or more private investment. For example, as this report
was being written, Brazil had yet to decide whether to open its airport
sector to PSP.
Summary of This Report
This report presents the findings of a first-ever, comprehensive study of
how LAC region airports have evolved during a notable period of transi-
tion in airport ownership. It is an unbiased, positive analysis of what hap-
pened, rather than a normative analysis of what should be done to reform
the airport sector or to attract and structure PSP. It takes the first step to
respond to the need for more conclusive information about the influence
of airport ownership on economic performance and the measurable side
of operational performance. The report is centered on the study of three
dimensions of performance: productive efficiency, institutional set up for
the governance of the sector, and financing.
The analytical weight is divided into three chapters. In chapter 3, a
benchmarking exercise provides a thorough analysis of the technical per-
formance of LAC region airports. Chapter 4 compares the performance
of independent regulatory agencies and government regulatory agencies
as it relates to transparency, accountability, and the quality of their
bureaucracies. Chapter 5 investigates the growth and change of airport
tariff levels within the LAC region.
Efficiency Performance: A Benchmarking Approach
The use of benchmarking to measure performance in the transport sec-
tor and airport subsector, more specifically, is relatively new. Increased
PSP in the 1990s led to a call for a more thorough evaluation of airport
performance, both (a) to negotiate the terms and conditions of private
involvement and (b) to track the improvements or lack thereof resulting
from such involvement. As a result of this process, in the late 1990s,
benchmarking began to be accepted as an important management tool
within the airport industry. However, current papers using advanced

Overview 7
efficiency techniques neglect Latin American airports, focusing instead on
those of Asia, Europe, and North America. This report is a first attempt
to bring this kind of advanced analysis to the LAC region, and includes
four separate but complementary sections: (a) an investigation of techni-
cal efficiency using partial performance indicators, (b) the positioning of
LAC airports on a global efficiency frontier, (c) an analysis of the relation-
ship between airport performance and selected socioeconomic factors
and unique airport characteristics, and (d) an assessment of the evolution
of the airports’ productivity in the LAC region from 1995 to 2007.
The first part of chapter 3 investigates airport efficiency through par-
tial performance indicators, which are widely used not only in the airport
sector but also in other infrastructure sectors, such as water and electricity
and telecommunications.1
First, 14 partial performance indicators from
2005 put the LAC region in a global perspective through a comparison
of mean levels for the East Asia and Pacific region, Europe, and North
America. Second, an analysis of how these indicators changed over the
period from 1997 to 2005 provides some insight into how the advent of
PSP affected the technical efficiency of the region’s airports. Responses to
an original questionnaire from a representative sample of LAC airports
that covers more than 80 percent of passengers and aircraft movements
and 70 percent of air cargo allowed for a global comparison with partial
performance data collected by the Air Transports Research Society for its
periodic reports calculating airport technical efficiency in Asia, Europe,
and North America. Figure 3 shows results for one partial performance
indicator, passengers per employee, which is taken as an example for this
overview. For this particular indicator, Comodoro Arturo Merino Benítez
International in Santiago, Chile, and Congonhas International Airport in
São Paulo, Brazil, are the top performers. Partial performance indicators
in the airport sector should be interpreted with extreme care. In a multi-
input and multi-output service industry, like airports, they do not allow
for a conclusive identification of performance. For example, a high num-
ber of passengers per employee could represent either high efficiency or
low quality of service.
This particular stage in the analysis revealed a great deal of variation in
the performance of LAC region airports. However, Congonhas
International Airport (CGH) in São Paulo, Brazil; Cancún International
Airport (CUN) in Mexico; and Comodoro Arturo Merino Benítez
International (SCL) in Santiago, Chile, were the airports that most fre-
quently appeared among the top three performers in the 14 partial per-
formance indicators calculated.

Figure 3 Partial Performance Indicator: Passengers per Employee,2005
Source: Author’s calculation.
Note: LAC = Latin America and the Caribbean; NA = North America; EU = European Union; AP = Asia-Pacific.
For a list of airport codes and the airports they represent, see page xxiii.
0 10 20 30 40 50 60 70 80 90
SCL
CGH
CLO
AEP
CUN
MTY
GDL
BSB
SJO
MEX
LIM
EZE
GRU
GYE
FTE
SDQ
BAQ
GIG
SAL
MAO
PTY
VCP
mean LAC
mean NA
mean EU
mean AP
# of passengers, thousands
airports privately operated
airports publicly operated

Overview 9
The second section of chapter 3 conducts an analysis of efficiency
using aggregate measures and econometric techniques to compute a
global efficiency frontier for the airport sector and to identify the position
of Latin American airports relative to the best practice worldwide. The
Data Envelope Analysis (DEA) method used for this stage positions LAC
region airports around the frontier relative to best-performing peers of
the same scale. Results relating to technical efficiency in global perspec-
tive reinforced the findings of the initial analysis of partial performance
indicators. Privately operated airports were positioned closer to the fron-
tier than were their publicly operated counterparts, though this effect
was not significant across all the different specifications tested.
Two final tests round out the benchmarking exercise in chapter 3.
First, a truncated regression was performed to investigate the relationship
between socioeconomic factors and airport performance, using the aggre-
gate technical efficiency measures from the previous section. Results
suggest that variation in technical efficiency is largely the result of factors
exogenous to airport management. The models identified hub airports
and population size as the main drivers of technical efficiency in the air-
port sector. Hub airports are, on average, 10 to 15 percent more efficient
than other airports. Airports located in areas with more than 5 million
inhabitants are 17 to 20 percent more efficient than airports that serve
less populated areas. The only variable within the control of airport man-
agement that appeared to drive technical efficiency was the proportion
of revenue acquired through sources other than aeronautical tariffs.
Those airports that rely on sources other than aeronautical tariffs tend to
be more efficient. This relationship could not be used to make further
conclusions on the relationship between type of ownership and airport
efficiency, because both public and private airports surveyed varied con-
siderably in terms of the proportion of total revenue acquired from aero-
nautical tariffs.
Finally, a Malmquist quantity index of total factor productivity change
shows how airport productivity has changed across three sequences: 1995
to 1999, 2000 to 2003, and 2003 to 2007. From 2003 to 2007, strong
average annual productivity growth (3.9 percent) of the airport sector
reflected the strong economic growth of the region as a whole. Larger
airports tend to register faster productivity growth. Both publicly and
privately operated airports performed similarly over the three time peri-
ods, with publicly operated airports performing slightly better over the
whole period. The Malmquist index requires panel data for each unit
sampled. Because this panel data was largely unavailable for the region’s

airports, the first and second time series have very small sample sizes and
consequently produce results that are largely skewed by outliers. For
example, Argentina’s financial crisis precipitated the airport sector’s aver-
age annual productivity change of −18.1 percent over the 2000 to 2003
period, which pulled down the index’s reported regional average of −1.2
percent over the same period.
Overall, thorough data collection and extensive quantitative analysis in
chapter 3 suggests that, when multiple factors are considered, LAC air-
ports are not radically better or worse performers than those of Asia,
Europe, or North America. Within the LAC region, results were not sig-
nificant enough to declare a definitive relationship between ownership
(public or private) and technical efficiency. Technical efficiency appears
to be driven largely by factors outside of the control of airport manage-
ment, though high levels of nonaeronautical revenues (that is, revenues
accruing from commercial sources rather than airport tariffs) appear to
have a positive relationship with technical efficiency.
With this study being an initial attempt to perform benchmarking
analysis on LAC region airports, inconclusive results are to be expected.
Data limitations hampered the scope of the analysis of chapter 3 and
influenced decisions on the types of models used and analysis per-
formed, which, in some cases, led to less forceful results (these limita-
tions are diligently described within chapter 3). More frequent data
collection, combined with a common methodology, will considerably
improve the usefulness of the LAC experience as a resource for the
study of PSP and technical efficiency in the airport sector. A regional
body of airport regulators or an air transport specialized institution, such
as Airports Council International (ACI) or the International Civil
Aviation Organization (ICAO), would be best poised to design this
methodology. Given the wide variety of private participation schemes
used by Latin American countries, further research should consider
individual airports on a case-by-case basis. In addition, future research
should also assess financial efficiency as well as the impact of PSP on the
quality of services delivered.
Institutional Design and the Governance of Airport Regulators
Changes to the structure of economic regulation of LAC region airports
accompanied the increased role of private investment in airport infra-
structure. Chapter 4 addresses the realities and challenges of airport
regulators from a public sector governance perspective and analyzes insti-
tutional design, comparing both independent regulatory agencies (IRAs)

Overview 11
and government agencies (non-IRAs). It focuses on only those aspects of
governance that are directly related to economic regulation.The ultimate
objective of this governance analysis is to identify under which arrange-
ment regulatory governance can be enhanced.
In Latin America, the introduction of PSP in the airport sector was
often accompanied by the creation of IRAs to enforce concession con-
tracts and quality of service. In cases where the bulk of airport services
remained state owned, the role of regulator was placed in the hands of
government departments, with limited independence from sector author-
ities. Brazil represents an interesting case, in which an independent regu-
lator was created but only regulates one state-owned enterprise.
In chapter 4, qualitative comparative analysis is used to describe the
design and practices of airport regulatory agencies. Survey responses from
13 LAC region airport regulators (4 independent and 9 government
agencies) provided information on four main aspects of the governance
of airport regulators: (a) the autonomy of the decision-making process,
(b) the transparency of policies implemented by airport regulators,
(c) their accountability to stakeholders, and (d) the quality of bureau-
cracy (table 3). Regulatory agencies were assigned values between 0 and
1 for each of the four main aspects of governance according to predeter-
mined criteria.
Regardless of the existence of private sector provision of airport ser-
vices, an institutional design associated with an IRA appears to provide a
better channel for good regulatory governance than a government depart-
ment. Both regional and international experiences show the importance
of a government body that is highly specialized and has consumers as the
focus of its policies. At the same time, a regulatory agency is not capable
on its own to introduce institutional quality into an airport system where
policies are ill designed. However, even in an adverse context, chapter 4
shows that regulatory agencies enable an adequate representation of
stakeholders and act as a filter against discretional decisions.
A clear advantage of making regulations in regulatory agencies rather
than in government departments is related to measures aimed at enhanc-
ing the transparency of regulation. The division of transparency into
different dimensions within the report allowed for the identification of
several advantages in IRAs versus government departments.Consultations
are the most notable of these advantages. The consumer orientation of
regulatory agencies versus government departments, whether in the con-
text of state-owned companies or private providers, is a powerful factor
in bringing stakeholders’ opinions into the decision-making process.

Table 3 Criteria for Determining Regulatory Agency Governance Ratings
Autonomy
of decision making Transparency Accountability Quality of bureaucracy
Characteristics
• Regulatory powers
(tariffs, quality of service,
and so forth)
• Status of agency
• Procedures to appoint
or remove board members
• Budget sources
• Civic engagement
in rule making
• Consultations
• Publication of agency’s
decisions
• E-government
• Registry of board meetings
and decisions
• Appeals of agency’s decisions
• Effects of consultations
• Evaluation of agency’s
performance
• Accountability instrument
• Performance instrument
• Structure of staff positions
within the agency
• Educational levels
of agency’s staff
• Publication of vacancies
Source: Authors’elaboration.
12

Overview 13
Technical expertise is another aspect where IRAs show advantages.
The measure of bureaucratic quality found higher bureaucratic quality
levels in independent commissions than in government departments, on
average. These results are reflected not only in the educational levels of
the staff but also in the way vacancies are posted and filled. The most
controversial aspect of the governance of IRAs is autonomy. The measure
of autonomy found, on average, more guarantees of autonomy in IRAs
than in non-IRAs.
A worrisome outcome of the surveys’ analysis was the serious defi-
ciency of economic regulation in the airport sector in the LAC region. On
the one hand, very few of the agencies in charge of enforcing regulations
have in place the necessary information systems (regulatory accounting
manuals, economic and financial models) necessary to perform their tasks
correctly. On the other hand, even when agencies claim to have the
adequate information systems in place, the vast majority are not using
them to estimate the weighted average cost of capital, which is an essen-
tial variable for a regulator. In addition, the regulatory frameworks do not
seem to provide appropriate incentives for regulators to properly carry
out a frequent oversight of the quality of services provided by operators.
Despite the overall advantage of the IRA as a model for good regulatory
governance, conclusions should not be interpreted as a “one model fits all”
approach. Rather, they should be used to identify those mechanisms that
better guarantee open and sound decision making in the regulation of air-
port services. The comparison between IRAs and non-IRAs as alternative
institutional arrangements to regulate airports allowed the disaggregation
of governance into different dimensions and the identification of advan-
tages and disadvantages in both models. It is up to policy makers to priori-
tize those aspects that better fit their institutional and policy frameworks.
Financing Performance: Evolution and Benchmarking of
Aeronautical Charges at Latin American Airports
Given the size of the demand for air transport services and the significant
minimum investments necessary to have adequate airport services, most
airports in LAC can be considered natural monopolies. Accordingly, the
economic theory indicates that tariffs should be carefully regulated.
Aeronautical tariffs are, indeed, heavily regulated in Latin America and
the Caribbean. However, survey responses illustrate the poor record of
the LAC region’s airport regulators and ministerial departments when it
comes to the use of regional tariff benchmarking tools, indicating that
decisions about tariff levels and structure are often poorly informed. In

some cases, either airport regulators lack the technical capacity to per-
form this kind of analysis, or structural inefficiencies prevent or deter
qualified individuals from doing so.
The tariff benchmarking analysis presented in this report constitutes
an important first step in fostering dialogue on these issues and in set-
ting the basis for a more robust tariff benchmarking exercise at the
regional level, a task that should be led by sector regulators. Survey
responses from 26 airports in 20 LAC countries provide the basis for
the identification of changes in tariff structures and levels in three dif-
ferent years: 1995, 2003, and 2009. The selection of years responds to
the objective of identifying whether changes in tariff structures and
levels were the direct outcome of the introduction of private sector
participation in the management of airports. Since most airport conces-
sions in the region took place before 2002, 2003 was selected to discern
whether changes in tariff levels and structure corresponded with the
introduction of PSP in the airport sector. The year 2009 was included
to present the most recent tariffs available at the time this report was
written, while 1995 was chosen because PSP had not yet come to
occupy a prominent role in the LAC region.
Within this overview, regulated tariffs are understood as the total turn-
around costs faced by an aircraft, including landing fees (and night sur-
charges for lighting), aircraft parking, use of boarding bridges, and
passenger charges (passenger facility charges, security). The aircrafts
selected for comparison, the Airbus A320 and the Boeing 767 are consis-
tent with the type of fleets most commonly found in the LAC region in
2009.To provide an international reference to the benchmarking analysis,
the following airports were included in the sample: New York (JFK), Los
Angeles (LAX), Miami (MIA), Madrid (MAD), Paris (CDG), London
(LHR), and Frankfurt (FRA). These European and North American air-
ports concentrate most of the Latin America and Caribbean–based air-
lines’ international flights outside of the LAC region.
The following preview of results from chapter 5 shows how, in most
cases, total turnaround costs for most LAC region airports have increased
in recent years (see figure 4). Turnaround costs, as defined in this report,
for an Airbus A320 increased by 34 percent in real terms at most LAC
airports between 1995 and 2009.Very similar increases apply to a Boeing
767. For both types of aircraft used in this report, current total turn-
around costs in LAC region airports are, on average, at a comparable or
higher level than those in European and U.S. airports that are most fre-
quently served by Latin American and Caribbean airlines.

Source: World Bank elaboration based on information from IATA (1995, 2003, and 2009), Aeronautical Information
Publication (AIP) Colombia, AIP Costa Rica, El Salvador Airport, AIP Nicaragua, Panama Civil Aviation Authority
(CAA), Dirección Nacional de Aviación Civil e Infraestructura Aeronaútica (DINACIA—National Authority of Civil
Aviation and Aeronautical Infrastructure), Uruguay.
Note: Calculated turnaround costs assume a load factor of 71 percent; a daylight operation includes landing,
parking (initial 2 hours), boarding bridge, passenger facility charge, and security. Figure assumes a 71 percent
load factor. For a list of airport codes and the airports they represent, see page xxiii.
Figure 4 Evolution of Turnaround Costs for an Airbus A320,1995–2009
0
NAS
CCS
UIO
GIG
GRU
CLO
BOG
LIM
EZE
MEX
MGA
GUA
SJO
SCL
CUN
LPD
MVD
TGU
SDQ
ASU
VVI
MTY
PTY
SAL
GDL
KIN
1 2 3
US$,thousands (constant 2008)
4 5 6
1995 2003 2009

The increase in turnaround costs in real terms between 1995 and 2009
for the Airbus A320 and Boeing 767 has been accompanied by changes
in the tariff structure. Fees paid by airlines decreased between 1995 and
2009, while those levied on passengers increased. In fact, charges applied
to passengers, which currently account for over 85 percent of total aero-
nautical charges, increased in real terms by 44 percent between 1995 and
2009. The current tariff structure in LAC airports is similar to that pre-
vailing in the sample of European and U.S. airports, with a slightly higher
percentage of the share devoted to passenger charges as opposed to air-
line charges in the LAC region (figure 5).
The tariff benchmarking analysis carried out in this report does not
allow for definitive conclusions on the relationship between changes in
aeronautical charges and the introduction of private sector participa-
tion. The increase in aeronautical charges observed between 1995 and
2009 was shared by both publicly and privately operated airports.
Further research through a case-specific approach should be conducted
(a) to assess whether the introduction of private sector participation
has led to an increase in aeronautical charges and (b) to link changes
in aeronautical charges to the changes in the level and quality of air-
port services.
The study of airport tariffs is followed by a bibliography of sources
used in the creation of this report, as well as appendixes that include the
surveys submitted to airport operators to measure performance and to
airport regulators to gather information on their governance.
Conclusions
The air transport sector in the LAC region faces the same basic problem
as the other transport subsectors (roads, ports, rail, and urban transport):
the lack of objective data to construct a reasonable baseline to assess its
economic performance. Using that well-known initial diagnostic, this
report presents a comprehensive assessment of the evolution of airport
performance, investments, tariffs, and governance institutions. The assess-
ment is the result of extensive research to compile the very limited pub-
lic information available, complemented with questionnaires developed
exclusively for this report.
In summary, the main findings of the report are as follows:
• In the LAC region, pioneering the introduction of PSP in the operation
and expansion of airport infrastructure has led to total investments in

Overview 17
Source: World Bank elaboration based on information from IATA 2009, AIP Colombia, AIP Costa Rica, El Salvador
Airport, AIP Nicaragua, Panama CAA, DINACIA Uruguay.
Note: Calculated turnaround costs assume a load factor of 71 percent; a daylight operation includes landing,
parking (initial 2 hours), boarding bridge, passenger facility charge, and security. Figure assumes a 71 percent
load factor. For a list of airport codes and the airports they represent, see page xxiii.
Figure 5 Structure of Turnaround Costs for an Airbus A320
0
MIA
JFK
MAD
LAX
FRA
CDG
KIN
GDL
SAL
PTY
MTY
VVI
ASU
SDQ
TGU
MVD
LPD
CUN
LAC sample average
SCL
SJO
GUA
MGA
MEX
EZE
LIM
BOG
CLO
GRU
GIG
UIO
CCS
NAS
1 2 3 4 5 6
US$,thousands (constant 2009)
paid by airlines paid by passengers

excess of US$10 billion since 1995. Increased investment has not been
confined solely to large, privately operated airports. Demonstration
effects may have led publicly operated airports to emulate the success-
ful example of private counterparts through the pursuit of increased
investment.
• From 1995 to 2007, LAC region airports have become increasingly
productive, though they remain on average consistently less efficient
than those of Asia, Europe, and the United States. Even though the
smaller size of LAC airports prohibits them from exploiting
economies of scale, the alignment of management to international
best practices improved their productive performance in global
comparisons.
• From 1995 to 2009, both publicly and privately operated airports saw
an increase in aeronautical charges of more than 30 percent in real
terms. The structure of aeronautical tariffs also changed toward higher
tariffs for passengers and lower tariffs for airlines. Among possible
explanations are a decision to set tariffs following a cost-recovery prin-
ciple; less reliance on public sector subsidies; a need to cover higher
costs associated with better quality of services; and the need to com-
pensate private operators and more commercially oriented, corpora-
tized public airport operators.
• Airport economic regulation in the LAC region is weak. Independent
agencies and government departments do not meet the international
best practice criteria for transparency and accountability. Lack of tech-
nical capacity, inadequate funding, and the incorrect or insufficient use
of regulatory instruments are all likely causes.
Several key questions regarding the quality of airport services remain
unanswered. Did an increase in PSP affect the evolution and improve-
ment of airport service quality? How much? Were improvements cost-
effective? Who paid? Some anecdotal evidence indicates that quality
improved mainly owing to the expansion of related air and land infra-
structure. A proper impact evaluation of airport investments, including
micro- and macroeconomic effects, is overdue but requires data on qual-
ity that are currently unavailable.
To improve the productive performance of LAC region airports, this
report recommends, first and foremost, the enhancement of the capacity

Overview 19
of airport regulators to measure the impact of public policies. Higher-
quality regulation will call for consistent data collection and analysis,
allowing for the generation of a robust and well-grounded benchmark of
airport performance that highlights best performers. Better analysis will
make it possible to determine whether policies (introduction of PSP,
expansion of capacity, changes in the level of tariffs) achieve the desired
objectives.A strong foundation of information will increase the quality of
decision making, thereby reducing the unpredictability of regulatory
decisions and consequently the cost of capital. Ultimately, stronger air-
port regulation will further enhance the positive image of PSP in the LAC
region’s airports and encourage sustained investment. National efforts to
strengthen airport regulation will be most effective if supported by the
knowledge and experience of established institutions, such as Airports
Council International (ACI) and the International Civil Aviation
Organization (ICAO).
Each of the analytical chapters (chapters 3, 4, and 5) suggests addi-
tional next steps to enrich future studies. In addition to the analysis per-
formed in chapter 3, further research into technical efficiency should
collect and explore information on the quality of service provided, as this
is a major determinant of airports’ costs and a key input for strengthening
programs aimed at increasing competitiveness and growth (through tour-
ism, industry, and clusters of development or high-value-added air cargo
trade). Chapter 4 emphasizes continued investigation into regulatory
governance on a case-by-case basis. Chapter 5 recommends the system-
atic incorporation of regional tariff benchmarking exercises into the regu-
lar operations of regulatory agencies, in addition to further research into
the due diligence performed, the actual process for setting aeronautical
tariffs in Latin America, and the incentives they provide for infrastructure
investments.
The overall purpose of this report is to enhance the understanding of
airport performance in the LAC region. It is expected that the findings of
the report will motivate further analytical work to provide a menu of
policy options aimed at increasing the contribution of the airport sector
to economic growth.
Note
1. See Andrés et al. (2008) for a survey of the recent literature and an applica-
tion of partial performance indicators in the electricity, water distribution,
and fixed telecommunications sectors.

References
ACI (Airports Council International). 2009. “World Airport Traffic Report 2009.”
ACI, Geneva, Switzerland.
Andrés, L. A., J. L. Guasch, T. Haven, and V. Foster. 2008. The Impact of Private
Sector Participation in Infrastructure: Lights, Shadows, and the Road Ahead.
Washington, DC: World Bank.
IATA (International Air Transport Association). 1995. Airport and Air Navigation
Charges Manual. Montreal: IATA.
———. 2003. Airport and Air Navigation Charges Manual. Montreal: IATA.
———. 2009. Airport and Air Navigation Charges Manual. Montreal: IATA.
Private Participation in Infrastructure (PPI) Database. World Bank, Washington,
DC. http://ppi.worldbank.org/.

21
CHAPTER 1
Recent Evolution of the
Air Transport Sector
The evolution of the air transport sector has been closely linked with the
fluctuations of the global economy. Air transport demand, which is heav-
ily dependent on business activity, trade flows, and tourism, has experi-
enced long periods of continued growth alternated with brief crisis
periods of negative growth (figure 1.1).
Air traffic fluctuations are more intense than changes in the gross
domestic product (GDP). In fact, air transport traffic, measured as pas-
senger-kilometers (km), has a high income elasticity of demand of about
2.1
This amplifying effect has meant that, in times of crisis (such as those
associated with the second oil crisis in 1979, the Gulf War in 1990, the
terrorist attacks of September 11, 2001, or the global financial crisis of
2008), the impact on the sector has been much more negative than on
other segments of the economy. This feature has especially affected the
airlines because the progressive liberalization of the most important
aviation markets (most notably the liberalization process initiated by the
United States and the European Union in the late 1970s and 1990s,
respectively) resulted in an overall increase in competition and in the
This chapter includes developed countries, such as Japan and Australia, in the World Bank

narrowing of their operating margins, which increased their vulnerabil-
ity in periods of crisis. In the airport sector, where many of its facilities
are natural monopolies and consequently are regulated, these effects
have not been so evident.
Evidence of the impact of the economic slowdown that began in late
2008 confirms the strong relationship between the level of economic
activity and air transport passenger demand. According to traffic statis-
tics released by the International Air Transport Association (IATA),
international passenger traffic fell by 3.5 percent in 2009 relative to
2008 (IATA 2009).
The significant passenger traffic growth observed between 2007 and
2008 has been heterogeneous across regions. Figure 1.2 demonstrates that
all regions experienced high rates of growth in passenger demand in 2007
but the rate of growth has since decreased sharply across regions. In 2008,
the last year for which annual data across regions were available (at the
time this report was written), the Middle East experienced the greatest
increase in passenger traffic (5.8 percent), followed by Africa (4.9 per-
cent), and Latin America and the Caribbean (2.1 percent). Europe and
the East Asia and Pacific region both grew by 1.2 percent. North America,
on the other hand, was the only region with a negative growth rate, at
−3.1 percent.
Figure 1.1 Growth Rates in the Air Transport Sector and Global GDP,1980–2008
Source: World Bank estimation based on Airports Council International (ACI), International Air Transport Associa-
tion (IATA), and International Monetary Fund (IMF) data.
–5
–3
–1
1
3
5
7
percent
9
11
13
15
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
passengers GDP per capita

Recent Evolution of the Air Transport Sector 23
In absolute numbers, the airport sector handled 4.874 billion arriving
and departing passengers in 2008, as compared to 4.869 billion in 2007
and 4.5 billion in 2006, of which approximately 2.0 billion were interna-
tional and 2.8 billion were domestic. As shown in figure 1.3, North
America (the United States and Canada) by itself represented 48 percent
of domestic traffic, with 1.3 billion domestic passengers, and Europe rep-
resented more than half of global international traffic, with approximately
1.1 billion international passengers.
The results for global air cargo traffic for 2008 show that traffic
slowed down from the previous year by 3.7 percent, with domestic
freight declining more severely than international freight, at −5.4 per-
cent versus 2.4 percent. Such a deceleration could be attributed in part
to increases in fuel prices, which diverted traffic to other transport alter-
natives such as maritime, road, and rail. More recently, passenger and
cargo traffic have been considerably affected by the global economic
crisis that caused a major drop in international trade volumes; world-
wide demand for air cargo capacity began to dwindle in December
2008. The latest data from IATA indicate that compared to 2008, air
freight fell by 10.1 percent in 2009, representing the largest decline the
Figure 1.2 Passenger Traffic Growth,by Region,2007 and 2008
Source: World Bank estimation based on ACI data.
14
12
%growth
10
8
6
4
2
0
–2
–4
Africa
Asia-Pacific
Europe
M
iddle
EastLatin
Am
ericaand
the
Caribbean
North
Am
erica
2007 2008

Figure 1.3 Domestic and International Passenger Share,2008
a. Domestic passengers
b. International passengers
Africa
2%
Middle East
1%
Asia-Pacific
26%
Europe
15%
North
America
48%
Africa
5%
Asia-Pacific
21%
Europe
53%
Latin America and
the Caribbean
6%
Middle East
5%
North
America
10%
Latin America and
the Caribbean
8%

industry has seen in the postwar period. This fall has been driven pri-
marily by reductions experienced in Africa, Europe, and North America.
These regions experienced year-on-year output declines of significant
proportions: 11.2 percent, 16.1 percent, and 10.6 percent, respectively
(IATA 2009).
Disaggregating total cargo by region, figure 1.4 shows that North
America and the East Asia and Pacific region contributed the greatest
share (33 percent and 34 percent, respectively) to the industry’s 86 mil-
lion cargo tons handled in 2008, followed by Europe (20 percent), the
Middle East (5 percent), Latin America and the Caribbean (5 percent),
and Africa (3 percent).
The total aircraft movements handled by airports in 2008 was
77 million, a decrease of 2.1 percent compared to 2007. This figure
includes cargo, military, general aviation, and passenger aircraft move-
ments and translates into 87.3 passengers per movement. Ranking of
airports by number of aircraft movements shows that 9 out of the top
10 airports are located in the United States, with the exception of
Figure 1.4 Volume of Cargo Moved,by Region,2008
percent
Africa
3%
Middle East
5%
Asia-Pacific
34%
Europe
20%
North
America
33%
Latin America and
the Caribbean
5%

Charles de Gaulle airport in Paris, France. On the other hand, as indi-
cated by figure 1.5, the regions with the lowest share of aircraft move-
ments are Latin America and the Caribbean, along with the Middle
East and Africa. Together, they comprise only 13 percent of global
aircraft movements.
Latin America and the Caribbean Overview
The objective of this report is to gain a better understanding of the airport
sector in Latin America and the Caribbean (LAC) through an analysis of
the evolution of airport and air industry performance. Consequently, it is
important to present a general framework of recent regional trends, thus
expanding on the previous global analysis.
The LAC region has experienced great fluctuations in GDP growth,
with particularly sharp declines from 1997 to 1999 and 2000 to 2001
(figure 1.6). Periods of high growth rates, on the other hand, took place
between 1996 and 1997 and between 2004 and 2008. Specifically, in
2007, GDP grew at 5.6 percent, as commodity exporters benefited from
Figure 1.5 Aircraft Movements,by Region,2008
percent
Africa
4%
Middle East
1%
Asia-Pacific
14%
Europe
28%
North
America
33%
Latin America
and the Caribbean
8%

record prices and rapid growth in global demand. In 2008, however,
growth eased by 1 percent, due mainly to spillovers from the slowdown
in worldwide activity and to decreased demand for commodity exports
arising from the global economic crisis.
Overall, the region’s airport sector, measured by changes in passenger
traffic, has followed the economic cycle, and given the high elasticity of
demand with respect to GDP, changes in passenger growth rates fluctu-
ated more than GDP growth rates.
The LAC region accounts for a small share of the air transport sector
worldwide. Even though its total GDP is approximately 30 percent of
the U.S. GDP, the size of the air transport sector is one-fifth that of the
U. S. sector. Clearly, it has significant room for growth, which will depend
primarily on economic growth, but also on a wide combination of vari-
ables, including availability and quality of infrastructure (airports, access
to airports), an efficient air traffic control system, adequate investment
climate, and tourism development, among others.
Figure 1.6 GDP Growth and Passenger Growth in LAC,1995–2008
Source: GDP data obtained from World Bank Open Data; available at http://data.worldbank.org. Passenger data
obtained from ACI.
Note: GDP in constant U.S. dollars. GDP growth rates calculated as the weighted average of the following coun-
tries: Antigua and Barbuda, Argentina, The Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica,
Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica,
Mexico, Nicaragua, Panama, Paraguay, Peru, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines,
Suriname, Trinidad and Tobago, Uruguay, and República Bolivariana de Venezuela.
–6
–4
–2
0
2
4
6
8
10
12
1995
1997
1999
2001
2003
2005
2007
2008
%annualchange
GDP passenger growth rate

In 2008, the LAC region handled approximately 338 million passen-
gers, 4.6 million metric tons of cargo, and 6.4 million aircraft movements.
Globally, this translates into 7 percent of passenger traffic, 5 percent of
cargo traffic, and 8 percent of aircraft movements (table 1.1).
Table 1.2 provides a ranking of airports in the LAC region in a global
context, as measured by passenger numbers and organized according to
the 10 largest airports worldwide, followed by all LAC airports included
in the sample used for this report. Mexico City Airport, ranked 43rd glob-
ally, is the most important airport in the region in terms of passenger
traffic, handling a total of about 26.2 million passengers in 2008, approx-
imately one-third the number handled in Atlanta, which ranked first
worldwide. Furthermore, it should be noted that LAC countries have
only four airports among the top 100 airports worldwide and 14 airports
in the top 200.2
As for cargo, the entire LAC region handled a total of 4.6 million met-
ric tons in 2008, only 1 million metric tons more than the amount of
cargo traffic handled by the Hong Kong International Airport, the global
leader with 3.6 million cargo metric tons, and three times as much as
Miami, the North American cargo hub that handled 1.5 million metric
tons. Within the region, the top 10 cargo airports account for approxi-
mately 59 percent of the region’s cargo volume (see table 1.3). Among
those, Brazil boasts four airports (Guarulhos, Manaus, Viracopos, and
Galeão); Mexico two (Mexico City and Guadalajara); Chile one (Santiago
de Chile); Colombia one (Bogotá); Peru one (Lima); and Argentina one
(Ezeiza, Buenos Aires).
On the aircraft movements level, table 1.4 outlines the 10 top-perform-
ing LAC airports, out of which six (Bogotá, São Paulo GRU, Brasilia, Rio
de Janeiro, Cancún, and Santiago de Chile) experienced positive growth
between 2007 and 2008, with the Brasilia airport taking the lead.
Several stylized facts can be drawn from the available data: (a) consid-
ering passengers as the unit of measurement, airports in LAC, on average,
are smaller than those in North America, Europe, and the East Asia and
Pacific region; (b) airports in LAC, on average, have fewer aircraft move-
ments than airports in North America, Europe, and the East Asia and
Pacific region; (c) the most significant difference in output size between
the average airport in LAC and that of the other regions is cargo; and
(d) airports in LAC tend to rely heavily on international passengers rela-
tive to airports in North America and the East Asia and Pacific region.
Also, it is important to note that there is great heterogeneity among LAC
airports with respect to how they rank in terms of passengers, aircraft

Table 1.1 Latin America and the Caribbean Snapshot of the Airport Sector,2008
Domestic
passengers
Share of
global
domestic
passengers
International
passengers
Share of
global
international
passengers
Total
passengers
Share of
global
total
passengers
Growth rate
of total
passengers
(2007–08)
Cargo
(metric tons)
Share of
global
cargo
Growth
rate of
cargo
(2007–08)
Aircraft
movements
Share of
global
aircraft
movements
Growth rate
of aircraft
movements
(2007–08)
224,531,098 8% 113,850,200 6% 338,381,298 7% 8% 4,589,092 5% 4% 6,403,629 8% 0%
Source: Airports Council International (ACI) 2009.
29

Table 1.2 Global and LAC Airports Ranking: Passengers,Cargo,and Aircraft Movements,2008
Global
rank Airport Passengers
% change
2007–08
Cargo
(metric tons)
% change
2007–08
Aircraft
movements
% change
2007–08
World
1 Atlanta, United States
(ATL) 90,039,280 0.7 655,277 −9.0 978,824 −1.6
2 Chicago, United States
(ORD) 69,353,876 −9.0 1,332,123 −13.1 881,566 −4.9
3 London, United
Kingdom (LHR) 67,056,379 −1.5 1,486,260 6.5 478,518 −0.6
4 Tokyo, Japan (HND) 66,754,829 −0.2 852,444 −0.1 339,614 2.4
5 Paris, France (CDG) 60,874,681 1.6 2,280,050 −0.8 559,806 1.3
6 Los Angeles, United
States (LAX) 59,497,539 −4.7 1,629,525 −11.9 622,506 −8.6
7 Dallas, United States
(DFW) 57,093,187 −4.5 660,036 −8.7 656,310 −2.0
8 Beijing, China (PEK) 55,937,289 4.4 1,365,768 14.5 431,670 8.0
9 Frankfurt, Germany
(FRA) 53,467,450 −1.3 2,111,031 −2.7 485,783 −1.4
10 Denver, United States
(DEN) 51,245,334 2.8 250,994 −6.1 619,503 0.9
Latin America and the Caribbean
43 Mexico City, Mexico
(MEX) 26,210,217 1.3 382,417 −7.0 366,561 −3.1
62 São Paulo, Brazil (GRU) 20,990,662 7.3 470,404 −3.7 194,186 3.3
96 São Paulo, Brazil (CGH) 13,661,227 10.4 32,521 −6.8 186,356 −9.3
30

99 Bogotá, Colombia
(BOG) 13,456,330 4.9 547,928 −1.8 248,642 7.0
105 Cancún, Mexico (CUN) 12,786,423 11.3 16,496 −6.2 121,397 6.4
120 Brasilia, Brazil (BSB) 10,892,330 −6.2 56,619 −18.2 141,477 11.5
122 Rio de Janeiro, Brazil
(GIG) 10,695,992 −0.8 114,581 −1.2 130,595 8.9
144 Santiago de Chile, Chile
(SCL) 9,017,718 7.4 298,457 −1.1 101,103 7.0
156 Lima, Peru (LIM) 8,285,688 10.4 239,112 6.1 98,734 6.3
165 Buenos Aires, Argentina
(EZE) 8,012,794 7.0 205,506 0.3 71,037 0.7
172 Guadalajara, Mexico
(GDL) 7,393,500 −5.0 113,340 −8.8 152,353 −7.2
182 Monterrey, Mexico
(MTY) 6,749,240 −1.7 40,979 −1.0 110,150 −5.7
207 Buenos Aires, Argentina
(AEP) 5,687,221 0.4 14,690 4.3 85,793 5.5
242 Panama City, Panama
(PTY) 4,549,170 19.6 86,588 5.0 80,694 8.4
306 San José, Costa Rica
(SJO) 3,238,602 6.8 78,850 −1.0 77,114 2.6
307 Guayaquil, Ecuador
(GYE) 3,236,768 8.0 66,936 −8.9 74,205 4.1
334 Santo Domingo,
Dominican Republic
(SDQ) 2,719,899 −2.0 54,500 −5.4 41,454 6.0
(continued next page)
31

339 Nassau, Bahamas, The
(NAS) 2,665,000 0.8 NA −1.2 NA NA
344 Piarco, Trinidad and
Tobago (POS) 2,566,200 7.0 31,535 −3.9 65,401 −1.4
356 Cali, Colombia (CLO) 2,418,644 −0.7 41,354 −1.2 55,502 0.7
360 Medellín, Colombia
(MDE) 2,367,555 1.4 99,078 −20.4 46,470 1.1
365 Guatemala City,
Guatemala (GUA) 2,109,086 5.7 58,834 −15.3 102,519 11.2
384 Manaus, Brazil (MAO) 1,957,050 −13.1 130,723 −23.2 44,925 1.4
430 San Salvador, El Salva-
dor (SAL) 1,570,012 −1.7 28,162 −4.3 33,922 −4.7
483 Campinas, Brazil (VCP) 1,260,112 4.5 223,023 −2.8 32,399 10.9
493 Barranquilla, Colombia
(BAQ) 1,207,084 4.3 33,023 6.1 37,168 7.7
708 El Calafate, Argentina
(FTE) 494,722 14.1 120 7.3 6,355 20.9
Source: Author’s estimation based on ACI 2009 and the World Bank Benchmarking LAC Airports Database.
Note: Global rank is determined by total number of passengers. Rankings for Nassau (NAS), Guatemala City (GUA), and Santo Domingo (SDQ) correspond to 2007 data. Accordingly, the
percentage change corresponds to the change between 2006 and 2007.
Table 1.2 (continued)
Global
rank Airport Passengers
% change
2007–08
Cargo
(metric tons)
% change
2007–08
Aircraft
movements
% change
2007–08
32

movements, and cargo. For example, airports such as Guarulhos
International in São Paulo (GRU) and Mexico City’s Benito Juárez
International Airport (MEX) exhibit a similar scale of rankings across the
three outputs (passengers, aircraft movements, and cargo). However,
other airports rank differently for different outputs. Cancún International
Airport (CUN), for instance, ranks high in terms of passengers, average in
terms of aircraft movements, and low in terms of cargo. Another example
is Viracopos-Campinas International (VCP), which ranks low in terms of
passengers and aircraft movements but is the sixth highest in terms of
cargo, with about 223,000 metric tons in 2008.
In summary, the LAC region accounts for a small share of the air trans-
port sector worldwide. It accounts for only 7 percent of total passengers,
Table 1.3 LAC Airport Ranking (Top 10) by Cargo,2008
Rank LAC Airport
Cargo
(metric tons)
Percentage change
(2007–08)
1 Bogotá, Colombia (BOG) 547,928 −1.8
2 São Paulo, Brazil (GRU) 470,404 −3.7
3 Mexico City, Mexico (MEX) 382,417 −7.0
4 Santiago de Chile, Chile (SCL) 298,457 −1.1
5 Lima, Peru (LIM) 239,112 6.1
6 Campinas, Brazil (VCP) 223,023 −2.8
7 Buenos Aires, Argentina (EZE) 205,506 0.3
8 Manaus, Brazil (MAO) 130,723 −23.2
9 Rio de Janeiro, Brazil (GIG) 114,581 −1.2
10 Guadalajara, Mexico (GDL) 113,340 −8.8
Source: Author’s estimation based on ACI 2009 and the World Bank Benchmarking LAC Airports Database.
Table 1.4 LAC Airport Ranking (Top 10) by Aircraft Movements,2008
Rank LAC Airport
Aircraft
movements
Percentage change
(2007–08)
1 Mexico City, Mexico (MEX) 366,561 −3.1
2 Bogotá, Colombia (BOG) 248,642 7.0
3 São Paulo, Brazil (GRU) 194,186 3.3
4 São Paulo, Brazil (CGH) 186,356 −9.3
5 Guadalajara, Mexico (GDL) 152,353 −7.2
6 Brasilia, Brazil (BSB) 141,477 11.5
7 Rio de Janeiro, Brazil (GIG) 130,595 8.9
8 Cancún, Mexico (CUN) 121,397 6.4
9 Monterrey, Mexico (MTY) 110,150 −5.7
10 Santiago de Chile, Chile (SCL) 101,103 7.0
Source: Author’s estimation based on ACI 2009 and World Bank Benchmarking LAC Airports Database.

5 percent of cargo, and 8 percent of aircraft movements. Airports are
relatively small when ranked on a global scale.3
The LAC region has four
airports among the top 100 airports worldwide and only 14 among the
top 200.
Notes
1. Doganis 2006.An income elasticity of demand of 2 implies that when income
(GDP) grows by 1 percent, demand for air travel grows by 2 percent.
2. The airport that serves the city of Caracas in the República Bolivariana de
Venezuela occupies position 148 and handled 8.9 million passengers in 2008.
This airport was not included in the table because it was not possible to
obtain a response to the questionnaire submitted to the operator. Similarly,
the Luis E. Magalhaes Airport, serving the city of Salvador in Bahía, Brazil,
occupies position 186, but it was not included in this report.
3. The average airport in LAC served almost 5.8 million passengers in 2005,
whereas the average airports in North America, Europe, and the East Asia and
Pacific regions served 21.2, 17.8, and 16.5 million passengers, respectively.
References
ACI (Airports Council International). 2009. “World Airport Traffic Report 2009.”
ACI, Geneva, Switzerland.
Doganis, R. 2006. The Airline Business. London: Routledge.
IATA (International Air Transport Association). 2009. “Air Transport Market
Analysis.” IATA, Montreal, Quebec.
World Bank Benchmarking LAC Airports Database.
World Bank Open Data (database). World Bank, Washington, DC. http://data
.worldbank.org/.

35
CHAPTER 2
Investment in the Airport Sector
Several Latin American and Caribbean (LAC) countries embarked upon
a structural reform process in the 1990s.This process included, as a major
component, the deregulation and privatization of several infrastructure
services. In this context, the airport sector experienced a transformation
that resulted in the introduction of private sector participation (PSP) in
most LAC countries. A wide variation of PSP schemes was adopted.
While Argentina opted to concession its airport network to a single
operator, Chile adopted a case-by-case strategy and Mexico concessioned
its airports by groups. Peru used a mix of single and group concessions,
while Colombia and Costa Rica opted for the single concession scheme.
The most important economy in the region, Brazil, continues to operate
the largest airports through a state-owned corporatized enterprise.
However, in 2008 the federal government launched a consultation pro-
cess to introduce private participation in the airport sector. Table 2.1
shows the countries that, as of 2008, have introduced PSP in the manage-
ment of airports and details the type of contractual arrangement chosen
to incorporate the private sector.
This chapter includes developed countries, such as Japan and Australia, in the World Bank

Table 2.1 Latin American and Caribbean Airports by Type of PSP Arrangement
Country Project name
Financial
closure year
Type of PSP
arrangement
Subtype of PSP
arrangement
Contract period
(years)
Total investment
(US$ millions)
Argentina Islas Malvinas
International
Airport
1996 Concession Rehabilitate,
operate, and
transfer
30 1996: 8; 2007: 6
Argentina Airport
System
1998 Concession Rehabilitate, lease
or rent, and
transfer
30 1998: 1,581;
2007: 698
El Calafate Airport
Terminal
2000 Concession Build, rehabilitate,
operate, and
transfer
25 2000: 25 2007: 15
Neuquen Airport 2001 Concession Build, rehabilitate,
operate, and
transfer
20 42
Bolivia Bolivia Airports
Concession
1996 Concession Rehabilitate, lease
or rent, and
transfer
25 100
Bolivian Airports
Fuel Terminals
2000 Divestiture Full n.a. 17
Chile Diego Aracena
Airport
operate, and
transfer
12 8
El Tepual Airport 1996 Concession Build, rehabilitate,
operate, and
transfer
12 6
36

El Loa Airport 1997 Concession Build, rehabilitate,
operate, and
transfer
12 4
La Florida Airport 1997 Concession Build, rehabilitate,
operate, and
transfer
15 4
Santiago
International
Airport
operate, and
transfer
15 1997: 220; 2004: 22
Carriel Sur Airport 1999 Concession Build, rehabilitate,
operate, and
transfer
16 32
Cerro Moreno
Airport
operate, and
transfer
10 10
Carlos Ibanez Del
Campo Airport
operate, and
transfer
9 10
Colombia El Dorado
International
Airport Runway
1995 Greenfield project Build, operate,
and transfer
20 145
El Dorado
International
Airport
operate, and
transfer
20 650
Rafael Nunez
International
Airport
1996 Management and
lease contract
Lease contract 15 22
37

Financial
closure year
Type of PSP
arrangement
Subtype of PSP
arrangement
Contract period
(years)
Total investment
(US$ millions)
Ernesto Cortissoz
International
Airport
1997 Management and
lease contract
Lease contract 15 9
Cali Alfonso Bonilla
Airport
operate, and
transfer
20 178
San Andres and
Providencia
Airports
operate, and
transfer
20 20
Costa Rica San Jose
International
Airport
operate, and
transfer
20 161
Dominican Republic Dominican
Republic Airport
Network
operate, and
transfer
20 265
La Romana
International
Airport
2000 Greenfield project Merchant n.a. 55
Licey al Medio
Airport
2000 Greenfield project Merchant n.a. 30
Ecuador Mariscal Sucre
Airport
2002 Management and
lease contract
Management
contract
n.a. 0
New Quito Airport 2005 Greenfield project Build, operate, and
transfer
35 585
38

Guayaquil
International
Airport
operate, and
transfer
15 80
Honduras Honduras Airport
Network
operate, and
transfer
20 120
Jamaica Sangster
International
Airport
operate, and
transfer
30 175
Mexico Southeast
Airports Group
operate, and
transfer
50 1998: 120; 2000: 394;
2001: 28; 2002: 19;
2003: 7; 2004: 32;
2005: 61
Pacific Airports
Group
operate, and
transfer
50 1999: 264; 2000: 57;
2001: 26; 2002: 52;
2003: 29; 2004: 64;
2005: 73; 2006: 1,000
Northern Central
Airports Group
operate, and
transfer
50 2000: 230; 2005: 203;
2006: 376
Puebla Airport 2000 Concession Rehabilitate,
operate, and
transfer
n.a 80
Toluca Airport 2006 Concession Build, rehabilitate,
operate, and
transfer
50 100
39

Financial
closure year
Type of PSP
arrangement
Subtype of PSP
arrangement
Contract period
(years)
Total investment
(US$ millions)
Nuevo Laredo
Cargo Terminal
and transfer
20 7
Peru Jorge Chavez
Airport Cargo
Terminal
and transfer
30 8
Jorge Chavez
Airport
operate, and
transfer
30 2001: 110; 2005: 92
Regional Airport
Network Group I
operate, and
transfer
25 220
Uruguay Laguna del Sauce
Airport
operate, and
transfer
26 31
Punta del Este
Airport
1996 Concession Build, operate, own 20 30
Carrasco
International
Airport
operate, and
transfer
20 164
Venezuela, RB Margarita General
Santiago Marino
International
Airport
lease or rent,
and transfer
20 1994: 100; 2004: 34
Source: Authors’compilation based on the World Bank’s Private Participation in Infrastructure (PPI) Database and ProjectWare.
Note: The projects listed for each country correspond to those listed in the PPI database. The column for total investment reports investment commitments. When new investment
commitments are reported, the year (in italics) and amount are included. Otherwise, the amount reported corresponds to the financial closure year.
n.a. = not available.
40

Investment in the Airport Sector 41
It is important to highlight that the need to attract new investment
financing sources to improve the quality of services has been the state-
ment most commonly used by governments in the LAC region to justify
introducing PSP in airport infrastructure. The LAC region, with its diver-
sity in PSP schemes and more than 10 years of experience with the pri-
vate management of airports, is able to provide valuable insights into the
nature of investments in the sector.An analysis of the evolution of invest-
ments in the airport sector in the LAC region, therefore, is useful in
answering questions such as the following: Did the investment commit-
ments that were announced when the contractual agreement was signed
with the private airport operators eventually materialize? Were invest-
ments allocated to address the most urgent infrastructure needs? Were
there savings in construction costs brought about by the private conces-
sionaires? Did airport regulators satisfactorily supervise the compliance of
investment commitments made by airport operators? Questions along
these lines should also be answered by state-owned airport operator com-
panies to allow a comparison between the performance of public and
private airport operators.
Data requests on investment were a central part of the surveys distrib-
uted to airport operators and regulators in LAC during the preparation
phase of this report. Approximately half of the airports provided detailed
responses regarding airport investment commitments, but only a few
regulators reported on the compliance of investment commitments by
airport operators. In addition to the incomplete nature of the investment
data, comparability is difficult whenever investment information is gath-
ered from different operators and countries. Investment reporting is not
homogeneous because (a) tax laws allow for different depreciation meth-
odologies, (b) regulatory accounting methods differ with respect to the
types of investments that can be considered operation and maintenance
or capital costs, and (c) investments in airports can be made in aeronauti-
cal activities and nonaeronautical activities, with each definition being
different among airports.
Given the lack of a complete set of responses and the difficulties in
producing homogeneous estimates, this report does not answer several of
the questions raised in previous paragraphs. The only possible way to
answer them is through an in-depth case-specific analysis of each airport
and airport operator, a task that is pending for the LAC region.
Given the aforementioned limitations on the data gathered through
this study’s survey methodology, this report relies on specialized databases

to track the evolution of private investment in LAC airports, comparing
it to private investment in airports in other regions as well as to that in
other infrastructure sectors. Two data sources are considered: the Private
Participation in Infrastructure (PPI) Database, a joint initiative of the
World Bank and the Public-Private Infrastructure Advisory Facility
(PPIAF),and ProjectWare,a database produced by a private firm,Dealogic.
Both databases collect airport investment information, but whereas the
PPI database tracks private investment commitments exclusively for
developing countries as classified by the World Bank, ProjectWare tracks
project financing for both developing and developed nations. It should be
noted, however, that ProjectWare is not as complete as the PPI database,
since some cases of private financing are not recorded.1
Overall, the PPI and ProjectWare databases present partial investment
information. Their major limitation when analyzing investments in the
airport sector is that none of them report public investment, and thus
they underestimate total investments. For instance, neither database reg-
isters airport investments in Brazil, the largest economy in LAC, where
Infraero, the country’s state-owned airport operator, channels investments
through operating resources or through transfers made by the federal
government. A similar problem is found for the biggest air transport mar-
ket in the world, the United States, where investments in airports are
done through federal funds, by issuance of bonds with municipal or state
guarantees, and by airlines.
Private Project Financing in the Airport Sector Worldwide
The ProjectWare database, which covers financing in the airport
sector from 1996 to 2008, reported a total of 110 projects worldwide
amounting to US$64 billion during this period. Figure 2.1 details the
historical investment in airports worldwide: 2003 experienced the larg-
est volume and largest annual increase for airport financing, measured
by the number of projects across all regions. More recently, however,
the number of airport projects receiving financing as reported by the
database has decreased, from 14 in 2007 to 9 in 2008. With respect to
project financing in value terms, the greatest financing amount took
place in 1996, with 77 percent of the total amount attributed to the
East Asia and Pacific region alone as a result of significant investment
commitments of approximately US$10 billion for the Hong Kong SAR,
China, airport.

When analyzing regional contributions to private airport project
financing, it becomes evident that, historically, the two regions receiving
the largest financing share are East Asia and Pacific, and Europe and
Central Asia. Traditionally, both regions accounted for approximately 90
percent of total project financing in the airport sector. These have been
followed by Latin America and the Caribbean, South Asia, and finally
North America (see figure 2.2).
If countries with project financing are divided into income-level cate-
gories, it would be reasonable to assume that countries with higher levels
of economic development would have higher levels of financing, as those
are the countries that handle greater amounts of passenger and cargo traf-
fic and therefore require greater investments to maintain or expand their
airport capacity. Moreover, these countries tend to provide better condi-
tions to attract large quantities of private financing. The evidence sup-
ports this hypothesis, as high-income countries received most of the
private financing, accounting for 81 percent of the total, while middle-
income countries accounted for 19 percent for the period 1996–2008.
Figure 2.1 Project Financing in the Airport Sector by Number of Projects,Total
Project Amount,and Region,1996–2008
0
2
4
6
8
10
12
14
16
18
0
2
4
6
8
10
12
14
16
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
#projects
US$billions
East Asia and Pacific Europe and Central Asia
Latin America and the Caribbean North America
South Asia projects (right axis)
Source: Author’s estimation based on ProjectWare data.

These results are reason for concern, as developing nations within the
middle-income category have received fewer resources for investing in
their airport sectors. Given that, in recent years, airports in developing
countries have experienced very high rates of growth of passengers and
cargo volumes, it is important to realize that they also require significant
investments to upgrade their facilities and broaden their operations in
response to such growth in demand. The economic crises that began in
2008 has reduced the pressure on the available infrastructure as demand
fell, but if the relative growth rates return to the levels observed prior to
the crisis, the remark made about investment needs in fast-growing devel-
oping regions will hold true.
Table 2.2 disaggregates project financing to the income level, region,
and country between 1996 and 2008. Across countries, Australia has
clearly been leading, with total project financing of US$19,326 million,
followed by Hong Kong SAR, China, with US$11,050 million, and
Turkey with US$6,188 million. Combined, these three countries repre-
sented 57 percent of total financing for airport projects worldwide.
Private Investments in the Airport Sector
in Developing Countries
Investment commitments to infrastructure projects across sectors
(energy, telecommunications, transport, and water and sewerage) in
developing countries with private participation have been increasing on
Figure 2.2 Share of Project Financing in the Airport Sector,by Region,1996–2008
East Asia and
Pacific
50%
Europe and
Central Asia
39%
South Asia
4%Latin America and
the Caribbean
5%
North America
2%
Source: Author’s estimation based on ProjectWare data.

Table 2.2 Total Project Financing in the Airport Sector by Income Level,
Region,and Country,1996–2008
Income level,region,and country US$ millions
High Income: OECD
East Asia and Pacific
Australia 19,326
Japan 1,302
Korea, Rep. 127
New Zealand 115
Europe and Central Asia
Belgium 1,544
Denmark 1,369
Germany 924
Greece 2,700
Hungary 2,660
Italy 4,220
Spain 155
United Kingdom 4,068
North America
United States 1,275
High Income: Non-OECD
Hong Kong SAR, China 11,050
Cyprus 783
Netherlands Antilles 55
Bahamas, The 170
Upper Middle Income
Turkey 6,188
Chile 463
Costa Rica 161
Jamaica 145
Mexico 509
Panama 70
Uruguay 31
Lower Middle Income
Philippines 629
Albania 65
Armenia 30

Income level,region,and country US$ millions
South Asia
India 2,678
Colombia 795
Dominican Republic 265
Peru 378
Source: Author’s estimation based on the ProjectWare database.
Note: OECD = Organisation for Economic Co-operation and Development.
average over the years (figure 2.3). However, there was a reduction in
private investment between 1999 and 2004 and in 2008 due to the
financial crises.2 More specifically for the transport sector, roads have
been at the forefront of private investment in developing countries
every year since 1990, except for 1999 when they were led by railways
(figure 2.4).
Regional contributions to investment commitments in airport projects
were heterogeneous between 1991 and 2008. Overall, the LAC region
accounts for 30 percent of total commitments (figure 2.5). If this time
period is divided in two: from 1991 to 2000 and 2001 to 2008, the LAC
region would account for 70 percent of commitments between 1991 and
2000 and only 12 percent between 2001 and 2008. This fact shows that
LAC was a pioneer in introducing PSP in the airport sector compared to
other regions and that the intensity of the process has recently decreased
dramatically, either because most airports have already received the nec-
essary private investment to upgrade airport infrastructure, the region lost
its attractiveness, or governments decided not to open the sector for new
or more private investment.
An important dimension to consider when analyzing private sector
participation in infrastructure is the extent of participation of the private
sector. Generally this is summarized by the type of contractual agreement
and type of project. The PPI database divides investment commitments
into four subtypes of private participation in infrastructure: management
and lease contracts, concessions, greenfield projects, and divestitures.
Concessions, in turn, include three categories: (a) rehabilitate, operate,
and transfer (ROT); (b) rehabilitate, lease or rent, and transfer (RLT); and
(c) build, rehabilitate, operate, and transfer (BROT). Greenfield projects,
on the other hand, include a variety of different types of categories,

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