Airport Charges: Looking for the Right Scope

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Airport Charges Looking for the Right Scope

• Olivier Jankovec, Director General, ACI EUROPE

PSE Seminar on Airport Charges Brussels, 18
September 2007
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KEY ISSUES

• Should the proposed scope be maintained?
• If not, how should it be changed?
• What about pre-financing of airport
  infrastructures?

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THE EC PROPOSAL A BIASED ASSUMPTION

• The EC impact assessment
• Airport competition exists on various levels.
  However, in general competition between airports
  is judged to be relatively limited

• THE REALITY the vast majority of airports
• do not exercise market power

• competition between airports
• airlines buyer power gt airport market power
• Increasing competition from surface modes

How often have airlines actually lodged
complaints about the level of charges?
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THE GERMAN EXAMPLE
Airport charges are market driven at most
airports
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THE EC PROPOSAL THE WRONG SCOPE

• 1 Million pax
• Arbitrary
• Incorrect indicator of market power
• Will be quickly outdated
• In 2005 about 144 airports impacted...
• BUT
• in 2011 36
  additional airports impacted!

180 AIRPORTS IMPACTED UPON ENTRY INTO FORCE
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IS RAISING THE PASSENGER VOLUME BETTER?

• 5 Million pax?
• Arbitrary
• Incorrect indicator of market power
• It will be quickly outdated
• In 2005 about 55 airports impacted...
• BUT
• in 2011 15 additional
  airports impacted!

70 AIRPORTS IMPACTED UPON ENTRY INTO FORCE
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IMPACT OF THE PROPOSED SCOPE

• High costs for big and small airports
• (accounting, consultation, arbitration)
• Small airport (Newcastle) 1,3 million
• Big airport (Manchester) 7million

• Depending on
• size
• complexity of the operations
• number of airport users

Regional impact disproportionate and unjustified
burden for smaller airports! Unnecessary costs
throughout the system! Undermine
investments! Undermine development of airport
competition!
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SCOPE DEFINITION ESSENTIAL PREREQUISITES

• We need targeted regulation substitution to
  deficient market conditions
• Absolute need to reflect the reality of
  the market
• Existing competition dynamics
• Diversity of situations (no-one-size-fits-all)
• Evolutionary situations
• Promote a uniform European regime (all Member
  States)

Combine LEGAL CERTAINTY and
FLEXIBILITY (better regulation) This can not be
achieved with a fixed passenger volume
criterion!
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COMBINING LEGAL CERTAINTY AND FLEXIBILITY

• LEGAL CERTAINTY
• Target the top 25 EU airports
• At least 1 airport/MS
• Better indicator of market power

• FLEXIBILITY
• Reflect actual situation of abuse of dominant
  position irrespective of airport size

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THE OPT-IN/OPT-OUT CLAUSE

• Based on a competition assessment
• What is it?
• Test to determine whether or not an airport
  operates in a competitive environment and abuses
  its market power
• Who should conduct it?
• The Independent National Regulator or National
  Competition Authority
• How should it be carried out?
• Market definition
• ?Determination of relevant market
• Market power assessment
• ? Consideration of the competitive constraints
  within the relevant market

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THE OPT-IN/OPT-OUT CLAUSE (2)
CRITERIA SHOWING ABSENCE OF MARKET POWER

• No dominant national market share
• Easily available/nearby substitute airports
• Competitive charges
• Spare capacity, also available in substitute
  airports.
• Slots have little or no value
• Airline and route turnover at high levels or
  increasing
• Significant marketing and sales development
  undertaken
• Good and improving service quality, active
  efforts to lower operating expenditure

No Regulation is necessary !
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IS THE COMPETITION ASSESSMENT SOMETHING NEW FOR
EU MEMBER STATES?

• NO

• KEY CONCEPT under EU law since 1957
• Used to assess anticompetitive conducts in all
  sectors
• Widely enforced by the EC (DG COMP) and all
  National Competition Authorities

PRECEDENT IN OTHER SECTORS Electricity sector
Directive 2002/19/EC Market power test based on
competition assessment is the criteria mandated
to National Regulatory Authorities whether
regulation should apply In contrast, where no
market power is found, regulation must not be
imposed and existing regulation must be withdrawn

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PRE-FINANCING

• New infrastructure is needed to meet future
  demand
• To avoid the capacity crunch
• To promote airline competition
• Pre-financing is a valid option
• To lower financing costs of infrastructure
  development
• To smooth the increase in charges
• Pre-financing is recommended by ICAO, subject to
  some safeguards
• Transparency
• Substantive consultation with airlines (NO VETO
  power)
• Application for a limited time period, depending
  on the scale of the project
• Pre-financing is already in several national
  legislation
• Pre-financing counter-balances the fact that
  airlines

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