The heated debate on the regulatory framework for airports has highlighted the importance of creating good institutions for air transport in general. This paper defines the concept of effective regulatory institutions for air transport. It also describes the value chain for air transport and how the state intervenes with what type of regulatory institution. The paper concludes by highlighting the institutional reforms necessary to make regulation effective.
Over the last 25 years, the governance structure of airports has changed in many parts of the world. Today airports are no longer a homogenous group of public utilities, but a heterogeneous group with ownership structures ranging from state-owned to partial and even full privatisation, with regulatory systems ranging from cost regulation to price cap and even to complete deregulation and with different degrees of competition, ranging from pure monopolistic to oligopolistic markets. Airports, even publicly owned airports, have become more commercialized and more profit oriented. Thus, the upstream markets within the vertical air transport supply chain followed the trend set by the downstream markets, as the airline industry underwent these changes earlier and many ('downstream') air transport markets are now characterized by fierce competition between airlines (Winston and de Rus, 2008). These changes have put the airline/airport relationship under stress. The vertical relationship of the aviation industry does not resemble the smoothly operating supply chains of other industries, but more like the opposite of a perfect supply that chain managers learn to operate in their MBA courses. It has lead to a heated debate over airport regulation and the rules that determine the quality, quantity and price of airport services for airlines. IATA claims that airports are natural monopolies which are ineffectively regulated and which 'are exploiting, in many cases, their natural monopoly position' (IATA, 2007, p. 2.). The ACI response to this is that airports are a competitive industry which should not be regulated at all. The Association of German Airports argues for example that today, in Germany, 'airports are in tough competition and therefore the level of airport charges is determined by market mechanisms' (translation by author) (ADV, 2007, p 2). The OECD has taken up this issue and asked for some scientific guidance. The objective of this paper is to provide criteria, information and concepts for an objective discussion and dialogue between airports, airlines, regulator, governments and the general public but with specific reference to gateway airports. The focus is on gateway, airports which provide access to a country for international passengers and/or cargo. Therefore the analysis confines itself to the regulation of hubs and secondary airports. The latter are included because they provide some competition to hubs, although they are not gateways in the strict sense. On the contrary, no small airports, nor those that serve only regions with a small population density, nor secondary ones within metropolitan regions, will be considered. In the first section the paper develops the criteria to evaluate regulation. It then provides an overview on the performance of airports. In the third section rationale for airport regulation are discussed. Thereafter the alternative to regulation will be analysed. Can competition among airports substitute regulation, or is the competition between gateway airports not sufficiently intense? In the fifth section, the strength and weaknesses of different regulatory regimes are evaluated and options for a reform are discussed. The paper closes with a summary.
"This book provides a comprehensive guide to the economics of airports for all managers, regulators and educators within the aviation industry. Written by three renowned experts but made accessible and relevant for all those working within the industry, or aspiring to do so, it is the perfect entry point for learning about the underlying economics of airports as a crucial component of the air transport system. It explains the cost structures of airports, and then relates these to how airports determine their charges. It explains how charges at different airports differ, whether this is due to different types of traffic, different input prices, ways of producing outputs and different levels of efficiency. Most airports are publicly owned or regulated, and there has been a trend towards privatisation. The book explains how airports have been regulated and assesses how well the regulatory structures have performed; it discusses the trend towards light-handed regulation and the reliance on competition where this exists. The book examines the problems of limited capacity at airports and how these are resolved through slots and charging systems, and the long-term solution of investment in airports - why it is controversial, and how it can be achieved effectively. It also considers the environmental impacts of airports and the issues these pose for managers, from the well-known problems of airport noise to the growing recognition of the impacts of air transport on climate change, and the roles airports in mitigating these consequences. Written for airport and airline managers, regulators and students, this book will suit Bachelors and Masters programmes on air transport management"--
AbstractThe problem of how to evaluate investments in airports has now been studied for over 50 years. This paper analyzes the use of different methods like cost–benefit analysis (CBA), economic impact analysis (EIA), and computable general equilibrium (CGE) models to address the question. It assesses the strength and weaknesses of each method, and it discusses which methods have been used in different countries. The paper argues that the CBA approach and the newer CGE modeling approach address the policy issue well and that both methods are appropriate, although improvements are possible, especially in the newer aspects of evaluation. Furthermore, more data intensive CGE models are able to analyze broader aspects of the evaluation question for which CBA has had difficulty. EIA does not address the problem satisfactorily, and it misleads air transport policy. But this evaluation contrasts sharply with practice. EIA has been extensively used to decide on airport investment. CGE approaches are very promising, though further work is needed for them to reach their full potential. This paper pays particular attention to the relationship between CBA and CGE in airport investment evaluation and also the possible role of wider economic benefits (WEBs) of aviation in evaluation.
This book offers new insights into the theory and practice of economic airport regulation. In light of recent developments in aviation markets and policy, and the debate on airport regulation and benchmarking, it offers case studies on various aspects of economic regulation of city and regional airports. Written by experts in the field, the volume features contributions on the theory of regulation and benchmarking, as well as case studies on recent experiences in Europe and Latin America. This book is divided into three parts: Part I provides the theoretical background for the study of airport regulation and regulatory systems. Competition at airports is discussed, as are common forms of regulation and potential pitfalls. Part II addresses benchmarking, as benchmarking is often applied as an input to the regulatory process. Although benchmarking is necessary, reviews of how benchmarking is applied in the literature and in practice show that improvements can be made. Part III provides case studies on real-world examples. Addressing the question of whether and how European airport regulators set incentives for efficiency, and how benchmarking is used in the regulatory process, this book is an important contribution to the development of the transport industry in Europe and Latin America. It will appeal to scholars and students in transport economics, regional economics and related fields, as well as to practitioners and policy makers in the transport industry.
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This paper assesses whether Chapter 11 is a form of subsidy for US airlines. US airlines have used Chapter 11 to restructure their operations. This has been criticized as a subsidy by major non US airlines and governments for a long time and recently, in the "level playing field" debate. Applying legal and economic perspectives of subsidy, we examine the different opportunities of Chapter 11 to reduce airlines' costs. It is argued that most of the forms available, such as the modification of collective bargaining, do not constitute a subsidy. Only the termination of pension plans might involve a subsidy, but only using a legal definition of doubtful relevance since there is normally no use of public funds.
In dieser Studie äußern wir uns als Wissenschaftlerinnen und Wissenschaftler zu drängenden Fragen der Bremischen Wirtschaftspolitik - unabhängig von Interessengruppen oder politischen Parteien. Wir äußern uns allerdings bewusst in einer politisierten Zeit: Am 10. Mai 2015 wird die Bürgerschaft gewählt, die das Land Bremen in eine neue bundesstaatliche Finanzordnung führen wird, in die Zeit einer wirksamen "Schuldenbremse" nach 2019. Die Herausforderungen der reformierten Finanzordnung werden für Bremen größer sein als für jedes andere deutsche Bundesland, der Weg dorthin ist bereits jetzt steiniger als irgendwo sonst.
Cover -- Half Title -- Title Page -- Copyright Page -- Table of contents -- Contributors -- 1 Introduction -- Note -- 2 Regional economic theory and the impact of transport investments -- Introduction -- How natural advantage and governance can explain differences in regional economic development -- Explaining differences in regional economic development in the absence of differences in natural advantage and governance -- Imperfect competition due to increasing returns to scale -- Home market effect -- Core-periphery model -- Input-output linkages -- Increasing spatial fragmentation of firms and the role of communication costs -- Long-term developments in the costs of trade and transport -- Empirical assessment of the effects of transport costs on regional development -- Economic impact studies -- Econometric studies on the effects of air transport on economic development -- European regional policy -- Conclusions -- Note -- References -- 3 A review of connectivity utility models and their applications -- Introduction -- A review of the Connectivity Utility Model -- The construction of the direct air connectivity measure -- The construction of indirect air connectivity measure -- The construction of a multi-modal connectivity measure -- Applications of the Connectivity Utility Model -- China's direct air connectivity with other countries/economies -- China's overall connectivity (the sum of direct and indirect connectivity) -- Using the extended ConnUM for vulnerability analysis -- Conclusions -- Notes -- References -- 4 Wider economic benefits: What they are, how they manifest, and an example from network air services -- Introduction -- Literature evolution -- Public capital and economic growth -- Mechanisms of WEB -- Wider economic benefits vs catalytic effects -- Wider economic benefits (WEBs) and aviation.
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