Monday, April 28, 2014

Saved After Tsunami, Sendai Airport Plans Privatization: WSJ

The Wall Street Journal

By  Mitsuru Obe

Three years ago, the Sendai Airport was in ruins. Hit by a giant tsunami caused by the March 2011 earthquake, the runway was piled with overturned cars, uprooted trees and debris of broken homes. The control tower was out of order. The terminal building flooded.

The airport was rebuilt and reopened by U.S. forces aiding relief efforts under the name Operation Tomodachi. Given a new lease on life, the airport now hopes to boost traffic and bring more visitors to the Tohoku northeastern region.

Achieving that vision requires money, and on Friday, the government of Prime Minister Shinzo Abe approved the airport’s plan to auction off a 65-year concession to manage its facilities, making it the first privatized regional airport in the country. A new operator will be decided by next summer.

Miyagi Prefecture, which includes Sendai, hopes to improve services in the terminal and reduce costs, which in turn would allow the airport to cut landing fees and bring more business from low-cost carriers. The Sendai Airport currently has flights to Seoul, Guam, Taipei, Shanghai and Dalian as well as domestic routes.

In a similar plan, New Kansai International Airport Co., which runs the Kansai Airport serving the Osaka region, has already decided to outsource its management to the private sector in 2015.

Privatization of public infrastructure is a pillar of Mr. Abe’s economic program called Abenomics. A similar approach is expected to be used for the management of other regional airports, major expressways, toll roads, subway systems and municipal water systems.

The Olympic Village for athletes at the 2020 Olympics in Tokyo will also be developed in a similar fashion.

Miyagi Gov. Yoshihiro Murai has pushed privatization at Sendai Airport. “The airport is the face of the prefecture, the first place of encounter for visitors,” he said in a speech last year. “A lively airport will give visitors an impression of recovery.”

Most of Japan’s regional airports  operate in the red. The situation is expected to become more severe as the population declines. Many local governments are already concerned about how to manage their infrastructure in the future, and are looking for new ways to pay for the cost, said Kumiko Kakimoto, analyst at Standard & Poor’s.