Economic Regulation - IATA

Key Conclusions and
Recommendations
There is a clear case for independent economic
regulation of airports and ANSPs that have the
potential to exploit (and are exploiting, in many
cases) their natural monopoly position.
An effective and efficient regulatory structure
should not be a burden, but instead a strong
mechanism to support and deliver a more
efficient use of existing assets and the timely
and cost-effective delivery of new investment.
Airports and ANSPs are, for the most part, natural monopolies with market power. They
face very limited competition for airline customers and routes. Indeed any competition,
for example between major hub airports for transfer passengers, reflects competition
between the fares, service and routes provided by different airlines rather than between
the airports themselves.
Market power allows an airport or ANSP to arbitrarily raise its prices, resulting in excessive
and unjustified profits and/or the inefficient delivery of services. Economic regulation is
both necessary and desirable to constrain this market power in order to deliver continuous
improvements in cost efficiency and service quality.
IATA believes that independent economic regulation, where needed, should involve detailed
cost-efficiency targets and service quality standards. It should be preferably based upon
price-cap regulation with single-till procedures. Such a system has been successful in
improving efficiency where implemented and can be expanded and improved to meet
changing investment needs. It can be highly effective in improving the aviation industry for
the benefit of all stakeholders.