Private Sector: Uplifting Egypt’s Airport Management

Updated 3/19/2024 8:00:00 AM

Egypt's aviation industry plays a crucial role in the country's economy, contributing significantly to both the tourism sector and international trade.

Holding immense potential for growth and development, the privatization of airport management could be a catalyst for attracting investment if implemented strategically, improving infrastructure, and propelling the sector to new heights.

Driving Efficiency and Innovation in Egyptian Airports

In 2023, Egyptian airports saw a remarkable surge of 28% year-on-year (YoY) in passenger traffic, reaching nearly 47 million, as per the Ministry of Civil Aviation. This surge underscores the potential for growth within the sector.

In a strategic move aimed at developing Egyptian airports, Prime Minister Mostafa Madbouly last January emphasized the necessity of seeking assistance from private sector companies in managing and operating airports.

Madbouly highlighted the importance of this step in improving passenger services and increasing revenues.

Moreover, the prime minister stated that the private sector can assist in continuing intensive efforts to advance the aviation sector and raise the efficiency of work performance.

Privatizing airport management in Egypt can enhance airports by bringing in private sector efficiency, innovation, and investment. This move is aligned with the State Ownership Policy Document, which aims to reduce state involvement in various sectors.

The Egyptian government has been working on the public offering of airport operations and management.

Earlier in March, the cabinet held discussions on the proposed executive measures by the Ministry of Civil Aviation. These measures are designed to facilitate the transition of airport management and operation to private sector companies.

The cabinet is currently evaluating leading consulting firms and establishing technical, financial, and timeline parameters for the upcoming bidding process.

This plan aims to reflect an integrated vision for the privatization process of airport management in Egypt through a professional system to organize the flow of passengers and provide services. The government seeks a plan that attracts the best possible offers.

Ahmed Fawzy Hussein, a PhD holder and assistant professor of economics, explains to Arab Finance that “privatizing airport management can attract foreign currency as increased efficiency and better services may attract more passengers and airlines, leading to higher revenue in foreign currencies.”

Moreover, Hussein explains that “foreign investors may be interested in investing in the privatized airport, bringing in foreign investment.”

Heba Salah, an economic expert and public policy analyst at the Information and Decision Support Center (IDSC), tells Arab Finance that offering airport management to the private sector “is expected to enhance airports and the tourist experience in Egypt.”

Salah also highlights the advantages expected from private sector involvement, which include “reinforcement of administrative efficiency, promotion of greater transparency in airport operations, and improvement of operational efficiency.”

“This will reduce time and costs, revitalize local tourism, and optimize tourism revenues,” she says.

Additionally, Salah asserts the importance of private sector expertise in managing airports in driving infrastructure development, noting that “it can contribute to improving infrastructure utilization, luring investments, boosting sustainability, and driving digital transformation.”

Striking a Balance

As the privatization of airport management is expected to increase passenger numbers, it can affect infrastructure.

“With the ongoing surge in passenger volumes and airline fleets, airport infrastructure is rapidly emerging as a bottleneck to growth. In this regard, the privatization of airport management has a pivotal role to play in eliminating this barrier to growth,” Salah elaborates.

The privatization of airport management can have possible drawbacks, according to Hussein.

These drawbacks include “the potential risk of monopoly power by the privatized entity, which could lead to higher prices and reduced competition. Moreover, opposition from labor unions may arise due to concerns about job security and working conditions,” Hussein points out.

“This is in addition to the loss of government control over strategic infrastructure that could raise national security concerns,” he adds.

Hussein also expects privatization to “increase fees by the private operator to maximize profits, which could be passed on to airlines and passengers.”

Therefore, Hussein suggests that “regulatory oversight may be needed to ensure that the privatization does not lead to increased costs for airlines and passengers.”

Along with offering airport management to private entities, the country needs to ensure a “balance between regulations and private sector involvement through upholding transparency and oversight rights while reforming the public sector,” Salah says.

“This can be achieved by keeping state control over major companies in strategic and high-priority sectors and gradually exiting from less-priority sectors to raise efficiency levels and prompt private investments,” Salah suggests.

This balance is crucial for “optimizing benefits and addressing challenges within the airport management privatization agenda,” Salah adds.

Egypt's booming aviation industry presents immense potential for further growth. Privatization of airport management offers a strategic approach to unlocking this potential.

Experts anticipate improved services, infrastructure development, and a potential influx of foreign currency; however, a balanced approach is crucial.

By Sarah Samir