Ensuring fair and transparent costs at EU airports

A4E seeks to tackle the excessive cost of EU airports by ensuring that airports with significant market power are effectively regulated.

As de facto monopolies, these airports can act independently of the interests of airlines and passengers. They can charge excessively and earn excess returns, operate inefficiently and invest unnecessarily while providing poor quality of service.
Airport charges account for up to 20% of airline costs and have more than doubled at several of Europe’s top 30 airports over the past decade. An independent study for the European Commission found that the “profit margins [at some of these airports] are far above the world average” which indicates market power and excessive charging.
This drives up airline costs, undermines competitiveness, and results in long-term detriment to passengers in terms of choice and affordability.
The 2009 EU Airports Charges Directive (ACD) was meant to harmonise the regulatory framework for airport charges in Europe by setting minimum requirements on consultation and transparency to compensate for the market power of the airport as the sole infrastructure provider at a given city or in a given region.
Yet the ACD has failed to provide the right framework to incentivise airports to operate efficiently and to prevent excessive charging and excess returns. All the ACD requires is:

  • for EU Member States to have an independent supervisory authority (ISA) – but it does not set out what these authorities should do;
  • for airports to have some transparency about costs – but it does not say how these costs should be efficient and controlled or what the level of transparency should be;
  • for airports to consult on the level of charges – but it does not detail how airport users’ views must be taken into account;
  • for airports to consult on new investments – but it does not define how airport users’ views must be taken into account, especially in the early stages of investment decisions.

As a result, the regulation of airport charges remains inconsistent and ineffective in many parts of Europe. The current Directive is process-oriented, not outcome-oriented. It has failed to ensure meaningful consultation and transparent charging systems – airports provide limited information on their cost base and investment plans. Effective oversight by independent regulators is also the exception rather than the rule due to limited resources, independence or powers to intervene.
Airport charges should be based on efficient costs and appropriate investments that deliver the services that passengers and airlines need. They should be related to the airport’s actual costs and be non-discriminatory.
These investment costs should not be passed on primarily to airlines through higher charges, while airport revenues from commercial activities such as retail, food and drink, advertising and parking are completely disregarded when charges are set. Passengers should benefit from the non-aeronautical revenues they generate at airports: commercial revenues should be used to lower charges for aeronautical activities. People primarily use airports to fly, not to shop or park their car.
A4E calls for a substantial reform of the Airport Charges Directive – with stronger rules on consultation, transparency, independent oversight and a mechanism to identify and regulate airports with significant market power – to ensure that the European aviation industry remains competitive and efficient. Effective economic regulation is needed to ensure that airports do not abuse a dominant position and to replicate competitive market outcomes.

DOWNLOADS

Effective Regulation of Airport Market Power
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Summary
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Position Paper on Airport Market Power
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Position Paper on Single Till
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Position Paper on Consultation and Transparency
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Position Paper on Cost of Capital
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Analysis of Airport Charges Trends – Report by Aviation Economics
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Steer Davies Gleave 2017 Study
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A4E is calling for reform of the legislation governing airport regulation in Europe, a more effective regulation of monopoly airports, and effective controls of security costs.