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NEWS Last modified on January 25, 2017

The cost of congestion at Europe's busiest airports – sky high air fares

Congestion at Europe’s busiest airports is pushing up air fares leading to consumers paying up to €2.1 billion a year too much for airline tickets, according to a new report.

The new study, carried out by SEO Amsterdam Economics and Cranfield University, has been backed by ACI Europe, which has long warned about a potential capacity crunch in the future if new infrastructure is not brought online.

The report, ‘The Impact of Airport Capacity Constraints on Air Fares’ – points out that scarce capacity ultimately means a limit to the number of aircraft that can arrive at or depart from an airport – particularly at the busiest times of the day or year.

And it notes that while economic regulation of larger airports keeps airport charges low, and even below actual airport costs, it does not suppress demand.
It warns that with demand to fly at peak times continuing to rise at congested airports, and the supply of aircraft and air services remaining constant, prices inevitably go up.

As a result, every 10% increase in airport congestion leads to an aggregate +1.4% to 2.2% increase in air fares.

Speaking at at the European Parliament last night, ACI Europe president and president and CEO of Groupe ADP, Augustin de Romanet, said: “This new study spells it out very clearly. Incumbent airlines are collecting scarcity rents at capacity constrained airports – which, of course, undermines their incentive to support capacity expansion and also helps explain why they so fiercely oppose increases in airport charges.

“By 2035, passengers will be paying every year €6.5 billion in higher fares, specifically due to a lack of airport capacity.”

The report notes that this situation also has implications for airport regulation because if airlines are pricing on the basis of what passengers are prepared to pay rather than on a cost-basis, then lower airport charges wouldn't result in lower air fares.
In such a scenario, it suggests, any savings from lower airport charges will go straight into back pocket of the airlines.

Commenting on the European Commission’s recently launched evaluation of the EU Airport Charges Directive, de Romanet added: “Ultimately, what this shows is that what may be good for airlines – like lower airport charges – is not always good for passengers.

“Along with the rise of airport competition, this calls for a significant reset of the regulatory mindset – Europe needs to move towards a more passenger-focused and market-based approach to the regulation of its aviation sector.”

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