The media loves talking about the cost of living in general, and in particular the high prices at Ben Gurion Airport. Every so often, it zeroes in on the exaggerated price of one product at the airport: a cup of coffee costing NIS 30, "tax-free" sports and fashion stores that are more expensive than ordinary stores, and the noisy and emotional struggle between the Israel Airports Authority and the Hadar-Lod taxi agency over the franchise to operate a taxi service at the airport and the prices for it.
The public discourse about Ben Gurion Airport is superficial. It does not analyze interests or look for solutions; it merely preaches morality and goes headhunting for culprits. It is indisputably true: prices in Israel are too high, especially prices at Ben Gurion Airport, and a solution must be found for this. Solutions, however, are a difficult matter. It is much easier to take the easy and simple way out by finding the bad guy and putting him in the dock. Sometimes it is the franchise holders, sometimes the Airports Authority's management, and sometimes the Airports Authority's workers committee.
The Ben Gurion Airport franchise holders, however, do not charge NIS 50 for a glass of wine because they are bad. They charge these prices because they can get away with it, because that is their nature, and often, because they have to. Some of them are forced to raise prices because of the crazy operating costs forced on them by the Airports Authority and the outlandish terms of its tenders. Some of them will simply lose money if they charge lower prices.
In any case, the nature of any business is to maximize its profits and charge the highest price that it can. What can force a business to lower its prices? Competition. Businesses at Ben Gurion Airport have no real competition, because Ben Gurion Airport is the only way to get in and out of Israel.
The same is true of the Airports Authority and its workers. The nature of a workers committee is to get the best employment terms for the workers it represents. The nature of a workers committee in a monopoly is shut down its essential service twice a week, or to threaten to go on strike, in order to extort better and better employment terms. The nature of the management in such a place, in which it is closely associated with the committee, is to surrender to the committee's demands, so that the service will operate; roll the extortion over; and exploit its monopoly power to extract money from the franchise holders and their customers, and give that money to the workers.
On the face of it, this is the right place for the magical solution that politicians, journalists, and liberal leavers of comments on websites lover to bring up at every opportunity: privatization. What will happen, however, if the government suddenly privatizes Ben Gurion Airport? Will a private monopoly holding the goose give up its golden eggs? Will the salaries of Ben Gurion Airport workers fall, the bloated staff there shrink, the airport terminal tender franchise terms improve, and prices fall? Not at all.
On the contrary - in a government monopoly, only the workers rob the public. In a private monopoly, the shareholders and workers both rob the public, and while the workers committee steals millions, the shareholders are liable to steal hundreds of millions.
It does not really matter whether the main beneficiary of privatization is a tycoon from the prime minister's cocktail clique or savers and stock exchange investors. Every shareholder wants, and should, maximize his profits, and will be glad to maximize them even more in the absence of competition. All of this assumes that such privatization is at all possible right now; a more likely assumption is that the committee will manage to make our lives miserable and torpedo privatization on the way to winning several more fat packages of benefits, as has happened several times in the seaports.
Time for Ben Gurion Airport 2
The solution is not to privatize Ben Gurion Airport; it is to establish a completely separate and privately owned competitor free of the Airports Authority's stranglehold - a second airport, in which the state will intervene only when security and border control matters are involved.
There are several candidates for a competing airport. Sde Dov has an ideal location, although it is possible that the surrounding geographic space is too limited. An artificial island off the coast of the Greater Tel Aviv region is an option to be seriously considered, and it has major advantages (savings on real estate, ideal for preventing noise pollution). Nevatim in the south and Megiddo in the north are also possible candidates.
The winner of the privatization tender will have an interest in investing in its airport, developing it, populating it with cheap stores, and attracting airlines, passengers, and customers to it. The competition will force the Airports Authority and its franchise holders to lower the prices at Ben Gurion Airport. Competition will make it harder for Ben Gurion Airport workers to practice extortion, and could also create conditions that would facilitate future privatization of Ben Gurion Airport.
Such a plan will not go smoothly. It will arouse against it a huge campaign of "social" yowling from interested parties, Airports Authority workers, Ben Gurion Airport franchise holders, and an entire community of machers and Likud Central Committee members surrounding them, real estate developers, and residents shouting about damage to their quality of life and the value of their property. Residents and homeowners naturally want to live in a quiet place. They are all justified.
Ben Gurion Airport passengers, however, also naturally want to pay less. Break the monopoly, and the public will pay less.
The author is an economist, a member of the Minister of Finance Economic Advisory Board, and a candidate in the Zehut party.
Published by Globes [online], Israel Business News - www.globes-online.com - on June 28, 2017
© Copyright of Globes Publisher Itonut (1983) Ltd. 2017