Incheon airport presentation 이것이 완전 최종본이다.

Ko re a n E c o no my a nd B us ine s s
2012 S umme r S c ho o l
P ro fe s s o r S a ng Wuk A hn

Priva tiz a tio n o f Inc he o n
A irp o rt

2007033229 D o ng G yu L e e
2009019083 S o na m D he nd up
2011032638 S ue P a rk

Ta b le o f C o nte nts
I. Intro d uc tio n
II. Inc he o n Inte rna tio na l A irp o rt
III.Priva tiz a tio n O ve rvie w
IV. Priva tiz a tio n Pro c e s s o f Inc he o n
A irp o rt
V. C a s e S tud y
VI. C o nc lus io n

[ Inc he o n A irp o rt P riva tiz a tio n ]

Ⅰ . Intro d uc tio n

I. - 1. Re le va nc e to O ur
S tud ie s
• C u rre n t is s u e in Ko re an e c o n o m y:
“Ru n n in g th e g o ve rn m e n t is like ru n n in g a re lay. Th e
c u rre n t rac e r h as to m ake a las t s p u rt to p as s th e
b ato n to th e n e xt ru n n e r,” - F in an c e Min is te r
B ah k Jae - wan
• In c h e o n Airp o rt is o n e o f Ko re a’s m o s t
c o m p e titive c o rp o ratio n s , re ve n u e s o f 1 .28 trillio n
wo n an d a n e t p ro fit o f 324 b illio n wo n in 201 1
• H o w p rivatizatio n affe c ts d e ve lo p e d e c o n o m ie s
• Im p lic atio n s b e yo n d e c o n o m y


II. Inc he o n Inte rna tio na l
A irp o rt

II. - 1. B a c kg ro und o f
Inc he o n A irp o rt
• Lo c ate d 48 km (30 m i) we s t o f S e o u l
• Artific ially c re ate d lan d b e twe e n Ye o n g j n g an d
o
Yo n g yu is lan d s
• In c re as e d in te rn atio n al air traffic afte r S e o u l O lym p ic s
1 988
• C o n s tru c tio n b e g an in 1 992 to re d u c e lo ad o n G im p o
In te rn atio n al Airp o rt
• O ffic ially o p e n e d in Marc h 2001
• O n e o f to p te n b u s ie s t airp o rts in th e wo rld with
n e arly 35 m illio n in te rn atio n al p as s e n g e rs in 201 1

II. - 2. P ha s e s o f C o ns truc tio n
• Ph as e 1 : 30 m illio n p as s e n g e rs , 1 .7 m illio n m e tric
to n s o f c arg o p e r ye ar
• Ph as e 2: re ad y b y B e ij g O lym p ic s 2008
in
- 44 m illio n p as s e n g e rs , 4.5 m illio n m e tric to n s o f
c arg o p e r ye ar
• Ph as e 3: p lan s to in ve s t 4 trillio n wo n b y 201 7
- 62 m illio n p as s e n g e rs , 5.8 m illio n m e tric to n s o f
c arg o p e r ye ar
• Ph as e 4: fin al s tag e to b e c o m p le te d in 2020
- 1 00 m illio n p as s e n g e rs , 7 m illio n m e tric to n s o f
c arg o p e r ye ar

II. - 3. O p e ra tio ns a nd
A c c o la d e s
• Rate d as th e “B e s t Airp o rt Wo rld wid e ” b y Airp o rts
C o u n c il In te rn atio n al in 2005- 201 2
• In c lu d e s a g o lf c o u rs e , s p a an d s au n a, p rivate
s le e p in g ro o m s , ic e s katin g rin k, c as in o , in d o o r
g ard e n s , Mu s e u m o f Ko re an C u ltu re , p raye r ro o m s
• 1 6 m in u te s fo r d e p artu re an d 1 2 m in u te s fo r arrival
p ro c e s s , far m o re e ffic ie n t th an th e g lo b al s tan d ard s
o f 60 an d 45 m in u te s re s p e c tive ly
• N e t p ro fit fo r e ig h t c o n s e c u tive ye ars
• C u rre n t wo rth o f 7.3 trillio n wo n , e xp e c te d to ro u g h ly
d o u b le in valu e with c o m p le tio n o f s e c o n d te rm in al


III. P riva tiz a tio n O ve rvie w

III. - 1. P rinc ip le s o f
P riva tiz a tio n
• D e fin itio n o f “p rivatizatio n ”- tran s fe r o f o wn e r-
s h ip fro m th e p u b lic s e c to r (e .g ., lo c al, re g io n al,
n atio n al g o ve rn m e n t) to th e p rivate s e c to r (e .g .,
p rivate in ve s tm e n t an d /o r m an ag e m e n t g ro u p s )
• Re ve rs e p ro c e s s is “n atio n alizatio n ”
• Airp o rt p rivatizatio n c an take a wid e ran g e o f
fo rm s (i.e , fro m p artially to fu lly p rivatize d
e n titie s )
• Ke y d is tin c tio n b e twe e n p rivatizatio n o f o wn e rs h ip
(o wn e r) an d p rivatizatio n o f m an ag e m e n t
(o p e rato r)

III. - 2. F o rms o f O wne rs hip a nd
Ma na g e me nt o f A irp o rts
• G o ve rn m e n t- o wn e d ; o p e rate d b y D e p artm e n t o r
Ag e n c y o f n atio n al g o ve rn m e n t
• G o ve rn m e n t- o wn e d ; o p e rate d an d m an ag e d b y a
p rivate c o rp o ratio n
• O p e rate d b y an in d e p e n d e n t Airp o rt Au th o rity, wh ic h is
fu lly o wn e d b y g o ve rn m e n t
• O p e rate d b y an in d e p e n d e n t Airp o rt Au th o rity, wh ic h
is fu lly o wn e d b y g o ve rn m e n t, b u t with m in o rity p rivate
s h are h o ld e rs (s o m e s h are s m ay b e p u b lic ly trad e d )
• Private ly- o wn e d (fu lly o r in m aj rity, p o s s ib ly with s o m e
o
o r all s h are s p u b lic ly trad e d ); o p e rate d as in d e p e n d e n t
airp o rt au th o rity

III. - 3. G e ne ra l A d va nta g e s a nd
D is a d va nta g e s o f P riva tiz a tio n
• In c re as e th e ab ility to rais e c ap ital fo r
in fras tru c tu re d e ve lo p m e n t
• G e n e rally as s o c iate d with o p e ratin g
e ffic ie n c y im p ro ve m e n ts
• H o we ve r, c o n flic tin g o b j c tive s b e twe e n
e
p u b lic g o o d an d p ro fit g e n e ratio n c an
le ad to n atu ral m o n o p o lie s , c o rru p tio n ,
lac k o f ac c o u n tab ility, an d p o te n tial c u ts
in s e rvic e s


Ⅳ . Priva tiz a tio n P ro c e s s o f
Inc he o n A irp o rt

Ⅳ - 1. B a c kg ro und
“ L o w Hub iniz a tio n “

Ⅳ - 2. P urp o s e
1. Intro d uc e A d va nc e d Ma na g e me nt
Te c hniq ue s

- Inc re a s e E ffic ie nc y a nd S e rvic e L e ve ls
- G o ve rnme nt’ s P ub lic E nte rp ris e P riva tiz a tio n
P ro je c t ( 2009)
- Inte rna tio na l Tre nd to P riva tiz e A irp o rt S ys te ms

2. F ina nc ia l Inflo ws a nd S up p o rts

2. F ina nc ia l Inflo ws a nd S up p o rts

- A irp o rt E xp a ns io n P ro je c t ( 2017)
: 34 B illio n D o llars are n e e d e d
: E xp an d Te rm in als an d Railro ad s
: Rais e C arg o C ap ac ity u p to 5.8 m illio n to n s
- C a p ita l Inflo ws thro ug h S ta ke S a le s
- B uild ing a C ity Infra s truc ture Ne a r the Inc he o n
A irp o rt

Ⅳ - 3. The P ro g re s s o f
P riva tiz a tio n
• Inc he o n A irp o rt o p e ne d a t 2001

• In 2002, the ‘ D J g o ve rnme nt’ trie d to s e ll 51% o f
its ’ s ta ke → F a ile d !

• In 2007, ‘ NMH G o ve rnme nt’ c o ns id e re d ‘ S to c k
E xc ha ng e L is ting ’ o f Inc he o n A irp o rt → F a ile d !

• Ne w ‘ MB g o ve rnme nt’ p us hing fo rwa rd the
Priva tiz a tio n o f P ub lic E nte rp ris e s
- In 2008, d e c id e d to s e ll 49% o f its s to c k
- F a c ing P ub lic Re s is ta nc e
- P la nning to s e ll 15% o f its s to c k in 2012, 34% in 2013
- In 2011, ma ke 15% a s a g o ve rnme nt- is s ue d s to c k
( IP O )

Ⅳ - 4. P ro s a nd C o ns
Pro s

1. G o ve rnme nt is C a re fully A p p ro a c hing !
2. G lo b a l Tre nd o f A irp o rt P riva tiz a tio n !
3. Ma rke t S urve illa nc e a nd Tra ns p a re nc y !

Ⅳ - 4. P ro s a nd C o ns
C o ns

1. A lre a d y a G o ld e n G o o s e !
2. P o s s ib le C ha ng e s in S e rvic e s ( e ve n in a
b a d wa y) !
3. S ta te L e ve l S id e - E ffe c ts !
4. Hig h D o me s tic O p p o s itio n !

Ⅳ - 5. Is s ue s
• Is s ue 1 : Why S e ll a n A lre a d y- Pro fita b le
E nte rp ris e ?

Ⅳ - 5. Is s ue s
• Is s ue 2 : Will We L o s e C o ntro l a nd Po we r?

Ⅳ - 5. Is s ue s
• Is s ue 3 : Is it a Po litic a l S c a nd a l ?


Ⅴ . C a s e S tud y

Ⅴ - 1. F a ilure C a s e – He a thro w
A irp o rt
 O ve rvie w
O wne r B ritis h A irp o rts
A utho rity
O p e ra to r H e a thro w
A irp o rt
Lo c atio n A uthon , U n ite d
Lo n d o rity
Kin g d o m
H u b fo r B ritis h Airways
We b s ite h ttp ://www.h e ath r h ttp ://www.b aa.c o m /
o wairp o rt.c o m

A irp o rt
The firs t ma jo r A irp o rt P riva tiz a tio n
1 ) In m id 80s , th e Th atc h e r
g o ve rn m e n t p rivatize d s o m e s tate
in d u s trie s an d d e c id e d to ap p ly th is
p o lic y to m aj r B ritis h airp o rts .
o

3) Th e c o m p an y was p rivatize d
th ro u g h a 1 00% s h are flo tatio n in 1 987.

4) B u t th e g o ve rn m e n t ke p t th e “
g o ld e n s h are ” in c as e o f a fo re ig n b id
(e xam p le ). S o , it is s till re g u late d b y th e
B ritis h C ivil Aviatio n Au th o rity.

A irp o rt
 B ritis h A irp o rt A utho rity A nnua l Re s ult, 2011

An n u al re s u lt ,201 1

A irp o rt
 A fte r Priva tiz a tio n o f He a thro w A irp o rt

( 1) Mo no p o ly
B B A c o n tro lle d airp o rts (6 in to tal)
ac c o u n te d fo r m o re th an 90% o f air
p as s e n g e r in an d aro u n d Lo n d o n .
Re s u ltin g in h ig h e r c h arg e s , h ig h e r
p arkin g c h arg e s an d re s tric tin g s o m e
p o te n tial e n tran ts (lo w c o s t airlin e s ).
O n e o f th e B B A c o n tro lle d airp o rt
G atwic k was s o ld at a lo s s o f $ 400
m illio n .

A irp o rt

 A fte r Priva tiz a tio n o f He a thro w A irp o rt

( 2) O ve r C o mme rc ia liz e d

In 1 960, wh e n B B A s till a p u b lic
c o m p an y it e m p h as ize d m o re o n th e
we lfare o f th e s take h o ld e rs , like
h avin g m an y s e ats as p o s s ib le in th e
airp o rt b u t to d ay e ve ry in c h o f s p ac e is
u s e d fo r re tail s p ac e .

A irp o rt
A fte r P riva tiz a tio n o f He a thro w A irp o rt
U nfinis he d p riva tiz a tio n

h e lan d in g an d th e take o ff p ric in g fo rm u la is s e t in ve rs e ly to th e p ro fit e arn e d
th e n o n re g u late d ac tivitie s o f th e airp o rt, like d u ty fre e , c ar p arkin g c h arg e s ,
re s tau ran ts . Wh e n B B As n o n re g u late d p ro fits are h ig h , as at H e ath ro w,
airp o rt is “ p u n is h e d ” b y b e in g fo rc e d to c h arg e lo we r fe e to airlin e s , c au s in g
e s s d e m an d , re s u ltin g in c o n g e s tio n .(S .H akim , 1 996)

) Re g ula tio n
Afte r p rivatizatio n th e re g u latio n o f th e airp o rt b y th e c ivil au th o rity h as b e c o m e
im al. (lan d in g c h arg e s )

Ⅴ - 2. S uc c e s s ful C a s e – C hub u
A irp o rt

1 ) With m u c h lo b b yin g b y lo c al
b u s in e s s g ro u p s u c h as To yo ta,
e s p e c ially fo r 24 h o u r c arg o flig h ts ,
c o n s tru c tio n b e g an in 2000.

2) It is Jap an ’s th ird larg e s t
in te rn atio n al g ate way afte r N arita
In te rn atio n al Airp o rt j s t o u ts id e To kyo
u
an d Kan s ai In te rn atio n al Airp o rt o u ts id e
O s aka. It o ffic ially o p e n e d in 2005.

3) Fo r 201 1 , th e airp o rt h ad aro u n d
9.6 m illio n p as s e n g e rs .

A irp o rt
 Re a s o ns fo r s uc c e s s
•L o c a tio n
1 ) To yo ta Mo to r C o rp o ratio n , H o n d a Mo to r C o .,
Ltd ., an d Mits u b is h i H e avy In d u s trie s , Ltd ., are
lo c ate d in th e re g io n .

2) C h u b u re g io n h as a p o p u latio n o f 21 ,71 5,822
as o f 201 0

3) C h u b u is th e m o s t vib ran t re g io n in Jap an ,
wh o s e to tal G D P re ac h e s U S $ 670 b illio n . Th is
n u m b e r is c o m p arab le to S o u th Ko re a’s o r
Au s tralia’s n atio n al G D P in 2004.

4) C h u b u , wh ic h p ro vid e s ac c e s s to 24 c itie s in
Jap an , h as a m o re e xte n s ive n e two rk o f d o m e s tic
ro u te s th an Kan s ai an d N arita.

A irp o rt
( 2) O wne rs hip

It is o p e rate d b y a c o m p an y th at is 50 p e r-
c e n t o wn e d b y p rivate in te re s ts an d th e re s t
b y th e c e n tral an d lo - c al g o ve rn m e n ts
in ve s tin g 40% an d 1 0% re s p e c tive ly.

( 3) E ffic ie nc y – Kaiz e n a c o n c e p t v e ry
p o p u - lar w ith th e J ap an e s e p riv ate
c o m p an ie s .

Th e C h u b u airp o rt p ro j c t is an im p re s s ive
e
e xam p le o f c o s t re d u c tio n . Th e to tal c o s t h as
b e e n s las h e d to 643 b illio n ye n , d o wn 1 25
b illio n ye n fro m an in itial e s tim ate fo r th e
c o n s tru c tio n o f airp o rt. Als o lan d in g fe e was

A irp o rt
( 4) A wa rd s - S e rvic e
4th B e st Airp o rt Wo rl wid e o f th e Airp o rt S e rvic e Q u ality
d
Award s b y Airp o rts C o u n c il In te rn atio n al an d B e st Airp o rt b y
S ize in th e 5 to 1 5 m illio n p as s e n g e r c ate g o ry.


Ⅵ . C o nc lus io n

Ⅵ . C o nc lus io n

Privatization has both advantages and disadvantages as presented earlier.
For Incheon airport , we have concluded that privatization of the airport at
this stage is not a good option, as learnt from the Heathrow airport case study
that privatization is not necessarily a good thing.

Incheon airport presentation 이것이 완전 최종본이다.

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