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Airports

Unlocking Airport Privatization: A Report by the Brookings Institution

Strategic Insights

— 2 min read

A new report by the Brookings Institution, titled 'Incentivizing US Airport Privatization,' argues that changes to U.S. tax law could unlock a market for airport privatization, creating significant financial windfalls for airport owners. The report highlights the current tax treatment of airport financing as a major barrier to U.S. airport privatization, which prevents outstanding tax-exempt airport bonds from retaining their tax-exempt status if an airport is leased to a private entity. The author, Robert Poole, proposes two key changes to level the financial playing field, which could lead to significant windfalls for owners of many large and medium hub airports.

Key Takeaways:

  • The report argues that changes to U.S. tax law could unlock a market for airport privatization, creating significant financial windfalls for airport owners.
  • The current tax treatment of airport financing is a major barrier to U.S. airport privatization, preventing outstanding tax-exempt airport bonds from retaining their tax-exempt status if an airport is leased to a private entity.
  • Robert Poole proposes two key changes to level the financial playing field: amending the law to allow existing tax-exempt bonds to remain in place and be serviced by the private partner under a long-term lease, and expanding the use of tax-exempt Private Activity Bonds (PABs) to include airports.
  • These changes could lead to significant windfalls for owners of many large and medium hub airports, with some airports having gross valuations that are substantial sums.
  • For example, Los Angeles (LAX) has a gross valuation of $17.85 billion, which is more than double the city's unfunded pension liability of $7.87 billion.
  • The report also addresses concerns about potential federal revenue loss, arguing that the new private entities would be subject to federal corporate income taxes on their earnings, leading to a modest increase in federal revenue over the long term.
  • Many airports with high debt loads would have negative net proceeds under current law, but the gross valuation of many airports is a substantial sum.
  • The funds from airport privatization could be used to pay off a large portion or all of a city's or state's unfunded public employee pension liability.

Statistics:

  • Los Angeles (LAX) has a gross valuation of $17.85 billion (Source: Report).
  • The city's unfunded pension liability is $7.87 billion (Source: Report).
  • If airport privatization were to occur, the new private entities would be subject to federal corporate income taxes on their earnings, potentially leading to a modest increase in federal revenue over the long term (Source: Report).

Sources:

  • Brookings Institution. (2025). Incentivizing US Airport Privatization.
  • Robert Poole. (2025). Incentivizing US Airport Privatization.

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