Risk Management and Governance for PFI Project ... - Title Page - MIT

Basics
● Initially, the airport had been managed and operated by the local government, but there
was no prospect of securing the financial resources for the investment for replacement
due to the increased demand, and the concession system was introduced in 1998.
● The project included the expansion (construction of the terminal and expansion of the
aircraft parking facilities) and the operation and maintenance of the entire airport. The
orderer (municipal) owns the facility. The operator, London Luton Airport Operations
Ltd., collects a use fee and will recover all of their initial investment by the fee.
● Luton Airport is the fifth largest airport in the UK, and it is a representative example of
successful PPP in the UK, which was honored as the “Best PPP” in 2004.
Successful factors
● Rapid response to growing demand with ancillary facilities: the facilities were
renewed in 1999. In addition to an expansion of airport taxiways, the project enhanced
ancillary facilities, such as shops, parking, and a railway station. The number of
passengers was nearly doubled from 3.4 million in 1997 to 6.5 million in 2001 (reaching
8.7 million in 2010) (Deloitte Touche Tohmatsu LLC, 2011). 12
● Revitalization of the regional economy: with the increase in airport passengers,
airport-related businesses, such as tourism, retail, and transportation, and trade-related
businesses have become more popular, and new employment opportunities were
produced.
In this way, through the promotion of a public-private partnership that utilized private funds and
ingenuity, Luton Airport has played a major role in the economic development of the region as a
whole and had a profound effect not only directly on airport industries but also on peripheral
businesses by producing new jobs.
Risk-Actualized Cases
This section describes actual cases where the risks have become apparent in the PFI projects.
Although there are various reported cases where risks became apparent in Japanese PFIs, this
chapter will introduce three characteristic examples, as follows: (1) the case of a health facility for
citizens that went bankrupt (Taraso Fukuoka), (2) the case of a similar health facility that partially
collapsed from an earthquake due to a construction defect (Supopark Matsumori), and (3) the case
12 The main cause of increase in demand is due to the growth of budget airlines, but the use of PFI method helped to raise
funds for facility expansion.
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