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ACI NEWS Last modified on June 18, 2018

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ACI director general, Angela Gittens, reflects on the need for economic regulation that encourages and not hinders airport growth.

Aviation is an essential generator of economic growth, job creation, global trade and tourism, and airports are a critical part of the system. Indeed, airports serve as engines of growth for their local, regional and national economies.

For this to continue, airports need permission to operate and grow from regulators and from the local and broader communities they serve.

Airports must produce the social and economic benefits that growth brings while minimising the environmental and social costs of their development and operations.

As well, airports are wealth generators for other members of the air transport value chain.

Over the past months, you will have noticed that some representatives of one of the other members of the value chain, have become stridently vocal in their criticism of the airport industry, calling for heavy-handed economic regulation with a view towards restricting airports’ ability to recover costs from airline users of their facilities and services.

This call demonstrates a fundamental failure to understand the implications of the evolution of the airport business environment over the past thirty years, largely caused by the changed dynamics of the airline market environment, and a fundamental misunderstanding of the role and purpose of economic regulation.

Clearly, economic regulation can have important direct and indirect effects on the costs of production and the quality of service provided. In an increasingly dynamic and competitive market, a regulatory framework should always be proportionate to the degree of market power, only intervening to correct market failures.

The framework should serve primarily to facilitate and incentivise commercial agreements between airports and airlines in a flexible manner, rather than burdening role players with unnecessarily rigid and procedures, destroying appropriate market behaviour.

Wherever possible, forms of regulation must be employed which encourage both parties to engage constructively in a commercial environment.

Today, airport competition is a reality that shapes the industry and its capacity to generate the funds needed to keep airports off of government tax rolls and have airports make the necessary investments in infrastructure to accommodate demand along with providing safety, security, environmental stewardship and quality customer service.

That quality customer service must extend on two sides: to the airlines and to the travelling public.

With liberalisation in much of the world, airlines are free to choose among airports and can and do switch away from airports when they deem that conditions do not suit.

Similarly, with greater transparency of routing options, air travellers can and do make choices, in some cases for origin or destination airports, and in virtually all cases, for connecting airports.

The combination of these factors represents competitive pressure on airports to make themselves attractive to both airlines and passengers. These pressures exert a strong downward pressure on the level of airport charges.

ACI’s 2018 Airport Economics Report clearly demonstrates that, over the past years, the aeronautical revenue generated from airport charges per passenger in real terms has remained stable, in the realm of $10 per passenger.

The evidence provided in this report is clear demonstration that the calls for tighter and rigid economic regulation for airport charges are unfounded.

ACI seeks to work in co-operation with governments, regulators, airlines and other aviation stakeholders to ensure that we develop a fertile ground for industry investments and benefit the communities we all serve.

Through such co-operation, we will continue to provide the travelling public with an air transport system that is safe, secure, economically and environmentally sustainable.

Towards that end, ACI World has recently published its Recommended Practices on Transparency and Consultations with Airlines on Setting Airport Charges, a document I invite you to download and consult for free by visiting the Airports Economics’ section of our website.

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Joe Bates

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