Economic Regulation - IATA

06 - Economic Regulation 41
NORTH AMERICA
United States of America
This chapter discusses the experience, so far, of
independent economic regulation of airports and ANSPs,
focusing on North America, Australasia and Europe 19 . It
examines the different systems that have been put in
place and assesses the advantages and disadvantages
of each one. The different approaches reflect different
circumstances and objectives for individual airports and
ANSPs, but also highlight the problem of regulatory
inconsistency in some countries.
The experience of each highlights the advantages and
challenges of regulation, along with the ongoing need for
improvement and flexibility in regulatory structures.
The US is the largest aviation market in the world but has
seen little change in terms of the ownership structure and
regulation of airports since they were first established.
The vast majority of US airports are publicly-owned, while
air traffic control is provided through the Federal Aviation
Administration (FAA) and funded through a specific and
separate passenger charge.
US airports enter into legally binding contracts with airline
users that detail the calculation and conditions of charges.
At many airports, airlines will lease or own terminal
facilities on an exclusive or joint-use basis. US airports
source finance from commercial bonds, passenger facility
charges and the Airport Improvement Fund, with the
latter provided through the FAA and financed by general
charges on airport users. This system provides a degree
of longer-term certainty in terms of revenues for airports
and user charges for airlines.
Consequently, US airports essentially operate under a
cost-plus, rate-of-return system, implemented through
two main approaches:
Residual approach
(e.g. used at Los Angeles International, San
Francisco, Dallas Fort Worth, Miami).
Airlines are responsible for paying the net operational
costs of the airport after taking account of any commercial
and non-airline sources of revenue (i.e. a cost-plus and
single-till system). Under this approach airlines assume a
large amount of operational risk at the airport, providing
a guarantee that overall charges will be set so as to
guarantee that the airport will break-even.
Compensatory approach
(e.g. used at Chicago O’Hare, New York JFK).
Each airline pays agreed charges to the airport on the
basis only of the cost of services associated with the
facilities they use (i.e. a cost-plus and dual-till system).
Under this approach, the overall airport operational risk
remains with the airport operator.
However, regardless of which approach is adopted, the
cost-plus nature of the system contains few incentives
for an airport to improve efficiency or to increase
revenues from non-aeronautical sources. There is no
clear incentive to minimise costs, as it simply reduces
19
Detailed accounts of many of the examples in this chapter are available from Forsyth, P, et al (2004), “The Economic Regulation of Airports”,
Ashgate Publishing.