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Sub-theme 4 l Conflict Resolution, Trade-off, and Overseas Projects ##MORE_LAYER_BOX##In the video section, you can watch the interview videos about Sucess of Incheon International Airport. The Interviewee is a Kang, Dong Seok and Lee, Jae Hee. Kang, Dong Seok is the first president of Incheon International Airport Corporation and the Minister from the Ministry of Land, Infrastructure and Transport in Republic of Korea. Lee, Jae Hee is the 3th president of Incheon International Airport Corporation##MORE_LAYER_BOX_END##
Conflict of Interests and Trade-offs
There is always an issue of ‘conflict of interests’ in this kind of big investment project. Resolving conflicts and the resulting trade-offs are important tasks of government policy makers.
In Korea, as in other countries, equitable development across provinces has been a sensitive political issue. While local governments have not participated financially with investments in local airports, the central government has built three new airports and remodeled others to increase their capacities while simultaneously building IIA. As the central government has invested nearly the same amount in local airports as it has in IIA, many of these local airports struggle with excess capacity after losing traffic to the competitive modes of high-speed rail (KTX) and highways. This has resulted in a huge trade-off between equal development among regions and efficiency of resource allocation.
There is a conflict between Gimpo International Airport and Incheon International Airport, the two airports servicing Seoul. Although GIA is much closer to central Seoul than IIA and has enough excess capacity to accommodate a few more international flights, the government has been reluctant to grant licenses in order to maintain IIA’s policy objective of being a hub airport. The conflict resolution and trade-off between efficient use of infrastructure and promoting a hub airport is an important issue for the government. They have been able to solve this conflict among various transport modes and airports by minimizing government subsidies to IIA. This was possible thanks to that airport’s high profitability.
The single-till managing system has made it possible to charge low landing fees and other airport user fees. For instance, IIA’s landing fee is only 30% of that charged by Kansai Airport in Japan. Although the competitive edge of low user charges is very effective in attracting flights, it hurts the ‘principle of beneficiaries-pay.’ In this case, there is a trade-off between efficient use of infrastructure and promoting the competitive position of an airport.
Outsourcing routine daily airport maintenance work and leasing commercial spaces to private businesses through a tendering process are important sources of efficiency and profitability for IIA. Presently, with the outsourcing of maintenance work being criticized as an abuse of the human rights of workers, the government is trying to transition these positions to that of regular, in-house employees. This is another trade-off: balancing workers’ happiness with human rights and IIA’s efficiency and profitability.
Overseas Projects ##MORE_LAYER_BOX##
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Based on its high service quality and abundant airport construction and operation experience, IIA officials have been consulting with airports overseas, providing airport master plans, evaluating the economic/technical validity of airport projects and/or assisting with operations since 2009. These include Khabarovsk Airport, Russia; Mactan-Cebu Airport, Philippines; new airports in Nepal and Bangladeshi, national airports of the Philippines, Indonesia and Turkey; Arbil Airport, Iraq; Surabaya Airport, Indonesia; Tashkent Airport, Uzbekistan; and the national airports system of Paraguay.
IIA has also provided technical consulting as Project Manager (PM) and Construction Manager (CM) worldwide since 2012. The airports helped include SiemReap Airport, Cambodia; Manila, Palawan and Mactan-Cebu airports, the Philippines; Dahuk Airport, Iraq; Imam-Khomeini Airport, Iran; Jakarta Airport, Indonesia; and airport immigration services for Dominica.
Governments and airports overseas have invited IIA professionals to their facilities to teach their airport operation and construction know-how. They include the Philippines’ Ministry of Transportation and Communication, and the airports of Khabarovsk, Russia; Deli, India; Jakarta, Indonesia; and Paraguay. Furthermore, Khabarovsk Airport has solicited capital investment from IIA, the only case of outbound foreign investment in Incheon Airport history.
Lessons learned l Policy Application for Developing Countries
Policy Applications for Developing Countries
Incheon International Airport is well known worldwide for achieving both targets of superior service quality and high profitability. Many people are curious about the causes of IIA’s unprecedented success.
Although it may not be possible to identify all the success factors, we have tried to explain the government’s hub airport strategy, the airport’s single-till management strategy, competition and outsourcing, and close cooperation between the CIQ institutions. Besides these, the most important thing in an airport project is deciding where to build the new airport and secondly who will own it and how it will be operated.
In the success story of IIA, the luckiest point was the ability to select an ideal site with low construction costs, close to Seoul, no problems with noise, and easy capacity to expand. The government policy of promoting competition and outsourcing, while maintaining government ownership but allowing the airport to operate and manage itself autonomously has proven very successful in achieving IIA’s management targets of high service quality and profitability.
The other success factors include close cooperation between the institutions of CIQ, the airport, and industry; a single-till management system (putting airside and landside sectors in one basket); and a tendering system to rent space to duty free shops and other private businesses. All in all, in this kind of huge investment projects, one should not overlook the importance of using a no-corruption and efficiency principle in conflict resolution.
Conflict of Interests and Trade-offs
There is always an issue of ‘conflict of interests’ in this kind of big investment project. Resolving conflicts and the resulting trade-offs are important tasks of government policy makers.
In Korea, as in other countries, equitable development across provinces has been a sensitive political issue. While local governments have not participated financially with investments in local airports, the central government has built three new airports and remodeled others to increase their capacities while simultaneously building IIA. As the central government has invested nearly the same amount in local airports as it has in IIA, many of these local airports struggle with excess capacity after losing traffic to the competitive modes of high-speed rail (KTX) and highways. This has resulted in a huge trade-off between equal development among regions and efficiency of resource allocation.
There is a conflict between Gimpo International Airport and Incheon International Airport, the two airports servicing Seoul. Although GIA is much closer to central Seoul than IIA and has enough excess capacity to accommodate a few more international flights, the government has been reluctant to grant licenses in order to maintain IIA’s policy objective of being a hub airport. The conflict resolution and trade-off between efficient use of infrastructure and promoting a hub airport is an important issue for the government. They have been able to solve this conflict among various transport modes and airports by minimizing government subsidies to IIA. This was possible thanks to that airport’s high profitability.
The single-till managing system has made it possible to charge low landing fees and other airport user fees. For instance, IIA’s landing fee is only 30% of that charged by Kansai Airport in Japan. Although the competitive edge of low user charges is very effective in attracting flights, it hurts the ‘principle of beneficiaries-pay.’ In this case, there is a trade-off between efficient use of infrastructure and promoting the competitive position of an airport.
Outsourcing routine daily airport maintenance work and leasing commercial spaces to private businesses through a tendering process are important sources of efficiency and profitability for IIA. Presently, with the outsourcing of maintenance work being criticized as an abuse of the human rights of workers, the government is trying to transition these positions to that of regular, in-house employees. This is another trade-off: balancing workers’ happiness with human rights and IIA’s efficiency and profitability.
Overseas Projects ##MORE_LAYER_BOX##
[Table 1. Overseas Pojects Assisted by Incheon International Airport]
| Projects | Airports Overseas | Period | ||
|---|---|---|---|---|
| Consulting | Operation support | 1 | Arbil, Iraq | 2009.02∼ 2014.03 |
| 2 | Surabaya, Indonesia | 2012.05～2015.04 | ||
| 3 | New Istanbul, Turkey | 2015.06 ~ 2020.10 | ||
| PM, CM, Technical assistance | 4 | Jakarta T3, Indonesia | 2015.09 ~ 2017.08 | |
| 5 | SiemReap, Cambodia | 2010.12 ~ 2011.06 | ||
| 6 | Manila T3, Philippines | 2012.11 ~ 2015.08 | ||
| 7 | Dahuk, Iraq | 2013.03 ~ 2016.03 | ||
| 8 | Palawan, Philippines | 2012.12 ~ 2018.01 | ||
| Master plan and feasibilty study | 9 | Jakarta, Indonesia | 2013.06 ~ 2015.12 | |
| 10 | Immigration service, Donimican airport | 2015.03 ~ 2016.08 | ||
| 11 | Mactan-Cebu, Philippines | 2015.08 ~ 2020.08 | ||
| Dispatch of professionals | 12 | Imam-Khomeini, Iran | 2016.12 ~ 2017.01 | |
| 13 | Khabarovsk, Russia | 2009.12 ~ 2011.12 | ||
| 14 | Mactan-Cebu, Philippines | 2010.08 ~ 2011.12 | ||
| 15 | New airport, Nepal | 2010.04 ~ 2011.01 | ||
| 16 | New airport, Bangladeshi | 2012.07 ~ 2013.03 | ||
| 17 | National airports, Philippines | 2013.12 ~ 2015.06 | ||
| 18 | Surabaya, Indonesia | 2014.11 ~ 2015.05 | ||
| 19 | Tashkent, Uzbekistan | 2015.12 ~ 2016.08 | ||
| 20 | National airports system, Paraguay | 2015.11 ~ 2017.06 | ||
| 21 | Philippines; Ministry of Transportationand Communication | 2010.07 ~ 2012.07 | ||
| 22 | Khabarovsk, Russia | 2011.12 ~ 2013.12 | ||
| 23 | Deli, India | 2011.09 ~ 2011.10 | ||
| 24 | Jakarta, Indonesia | 2012.04 ~ 2012.05 | ||
| 25 | National airports systme, Paraguay | 2014.10 ~ 2014.10 | ||
| Capital investment | 26 | Khabarovsk, Russia | 2011.07 ~ 2017.10 | |
##MORE_LAYER_BOX_END##
Based on its high service quality and abundant airport construction and operation experience, IIA officials have been consulting with airports overseas, providing airport master plans, evaluating the economic/technical validity of airport projects and/or assisting with operations since 2009. These include Khabarovsk Airport, Russia; Mactan-Cebu Airport, Philippines; new airports in Nepal and Bangladeshi, national airports of the Philippines, Indonesia and Turkey; Arbil Airport, Iraq; Surabaya Airport, Indonesia; Tashkent Airport, Uzbekistan; and the national airports system of Paraguay.
IIA has also provided technical consulting as Project Manager (PM) and Construction Manager (CM) worldwide since 2012. The airports helped include SiemReap Airport, Cambodia; Manila, Palawan and Mactan-Cebu airports, the Philippines; Dahuk Airport, Iraq; Imam-Khomeini Airport, Iran; Jakarta Airport, Indonesia; and airport immigration services for Dominica.
Governments and airports overseas have invited IIA professionals to their facilities to teach their airport operation and construction know-how. They include the Philippines’ Ministry of Transportation and Communication, and the airports of Khabarovsk, Russia; Deli, India; Jakarta, Indonesia; and Paraguay. Furthermore, Khabarovsk Airport has solicited capital investment from IIA, the only case of outbound foreign investment in Incheon Airport history.
Lessons learned l Policy Application for Developing Countries
Policy Applications for Developing Countries
Incheon International Airport is well known worldwide for achieving both targets of superior service quality and high profitability. Many people are curious about the causes of IIA’s unprecedented success.
Although it may not be possible to identify all the success factors, we have tried to explain the government’s hub airport strategy, the airport’s single-till management strategy, competition and outsourcing, and close cooperation between the CIQ institutions. Besides these, the most important thing in an airport project is deciding where to build the new airport and secondly who will own it and how it will be operated.
In the success story of IIA, the luckiest point was the ability to select an ideal site with low construction costs, close to Seoul, no problems with noise, and easy capacity to expand. The government policy of promoting competition and outsourcing, while maintaining government ownership but allowing the airport to operate and manage itself autonomously has proven very successful in achieving IIA’s management targets of high service quality and profitability.
The other success factors include close cooperation between the institutions of CIQ, the airport, and industry; a single-till management system (putting airside and landside sectors in one basket); and a tendering system to rent space to duty free shops and other private businesses. All in all, in this kind of huge investment projects, one should not overlook the importance of using a no-corruption and efficiency principle in conflict resolution.
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