The monopoly is more fragile than it seems

The opening of capital airports de Paris (ADP) deserves attention. In the privatization process that began in 1986 in France, there is indeed a major evolution. The original doctrine was to say that only public companies in the competitive sector should be privatised or see their capital open to private interests. In a second phase, it was discovered that the activities of the network often referred to as "public services" could also be privatized and that the consumer had thus lower prices and better services. Seen today as well in telecommunications in energy or air transport services.

Can we then consider that the opening of capital of Aéroports de Paris opens a third stage, the privatization of activities intended to be a "natural monopoly" This feature is at the base of the essential objection raised against this operation. It is argued that there is no place for a new airport in the Paris region, so that travellers who wish to come to Paris or to leave are forced to pass by the conditions imposed by ADP without that latter is slowed by the fear of competition.

However, the fear of a company abusing his position of "natural monopoly" is generally excessive. The monopoly is more fragile than it seems. In the case of the Paris airports, there are elements of competition: other modes of transport (rail and road), airports between them. Even a traveller from abroad and in another foreign country often has the choice to change plane in Paris, Frankfurt, London... The quality of the services rendered and the amount of royalty then play an important role.

The usual argument against the privatization of a "natural monopoly" is to rely on the well-being of the passenger could be "used" in the event of privatization. But, is it not yet precisely to better satisfy consumers in privatization Indeed, privatization leads the business owners to worry about the satisfaction of buyers. It also changes the system of incentives within the company: instead of applying the standards laid down by the public authority or to focus on the technical performance, staff is designed to meet the expectations of consumers.

In the case of the Paris airports, opening of capital project will make a not significant from the point of view of management, of the fact that the amount of the royalties will be now fixed by contract with the State for five years and not more than one year. It is indeed astonishing that EPA may have previously run in as precarious conditions as its leaders could not estimate future revenue for a very short horizon while the activity of an airport involves heavy investment.

Furthermore, ADP activity such as any airport is not limited to provide strictly relating to air transport. It's actually a multi-service company. Fees represent only a relatively small share of airport revenue, as with most airports in the world. But ADP has potential, because the company is the owner of a broad area of land that it is possible to enhance and many related activities can be developed. To the extent not directly related to air transport (stores) activities provide a major portion of the profits, ADP has interest to attract as many passengers as possible. It is, from this point of view, in a very competitive situation.

Act, 2005 on airports, royalties must cover the remuneration of the capital invested. There is an improvement over the operation of a public company. There is indeed now a possibility to practice a truth of price policy to benefit end users, insofar as it allows to ensure that the investments made by air traffic. Those who oppose the privatization of companies deemed to be in a "natural monopoly" situation simply forget the temporal dimension: what is important is not only the position of a business on a market, but its ability to adapt to the changes. But privatization promotes the reactivity of a company, on the one hand because it releases the rules of inadequate management and, on the other hand, because it creates the appearance of a system of incentives to the consumer.

However, it should be noted that the freedom of management thus granted by law to ADP is not even as important as that enjoyed by any other capitalist enterprise. Specific constraints are imposed on ADP by reason of its "public service missions. And there are two important constraints on its future price policy. ADP is not free to determine the conditions for issuance or sale of which is one of its key products, namely slots. And the Act provides that "the overall proceeds of charges may exceed the cost of services rendered to the airport". The Act thus endorses a company's technical vision and ignores the real economic operation. It is indeed as if there were objective costs and it ignores the essential function of profit as an indicator of the good suitability of entrepreneurial decisions to the needs of consumers. Indeed, the normal operation of a capitalist enterprise involves a reverse approach: business leaders try to assess the needs of customers and the prices they are willing to accept for the satisfaction of these needs. They are then looking for how to cut costs are not data exogenous to maximize profit.

However, despite the shortcomings of the airports Act, is to be welcomed the opening of the capital of Aéroports de Paris project, that can be considered the starting point happy for a new phase in the process of privatization in France since almost 20 years.