Economic Regulation - IATA
Economic Regulation - IATA
Economic Regulation - IATA
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Key recommendations for<br />
the framework of independent<br />
economic regulation<br />
Independence.<br />
<strong>Economic</strong> regulation should be independent from<br />
direct control by governments or airport authorities. An<br />
economic regulator should be established with clear<br />
objectives, or statutory duties and then provided with the<br />
resources and operational independence to meet these<br />
principles.<br />
Transparency.<br />
This should be achieved for both the process by which<br />
regulatory decisions are made and for the expenditure<br />
and investment plans of the regulated company.<br />
Information on key historic and forecast performance<br />
indicators, business strategies and planned investments<br />
should be available for consideration. The detail required<br />
should be appropriate to each case, helping to minimise<br />
the regulatory cost.<br />
Consultation.<br />
There should be a full and timely consultation process<br />
with airlines and other users on airport and ANSP<br />
operational and investment plans. The regulatory system<br />
should include measures (both incentive based and<br />
penalty related) to ensure that airports and ANSPs<br />
approach the consultation in an open and constructive<br />
manner. The complexity of ANSP investment plans, as<br />
well as some large-scale airport investment plans, may<br />
need further scrutiny from third-party experts.<br />
Flexibility.<br />
The regulatory framework should only act in an oversight<br />
role – with powers to initiate, prompt and intervene – in<br />
areas, such as capital investment plans, that commercial<br />
negotiations can pursue more effectively. However, it<br />
should retain a credible role in deciding contentious<br />
issues, such as allowable rates of return and price<br />
profiles, that guide and enforce greater efficiency among<br />
the regulated companies. The structure should have<br />
a degree of flexibility to adapt to significant external<br />
shocks, appropriate to the level of risk the company can<br />
reasonably be expected to bear. However, this flexibility,<br />
if used, should not undermine the longer-term credibility<br />
of regulation.<br />
A neutral dispute settlement mechanism.<br />
The regulated companies and the airline and other<br />
users should have a mechanism for appealing against<br />
the regulator’s decisions. Typically the neutral body will<br />
be the national competition authority. This provides<br />
an additional safeguard within the framework against<br />
regulatory failure, minimising the risk that the regulatory<br />
body itself can reach sub-optimal decisions. However, in<br />
order to minimise regulatory delays and complexity, the<br />
neutral authority should have the ability to assess and,<br />
if necessary reject, an appeal against certain criteria (i.e.<br />
the grounds for the appeal) before undertaking a more<br />
detailed assessment.<br />
Regulatory benchmarking.<br />
The heterogeneous nature of airports and ANSPs means<br />
that regulation should be undertaken at an individual<br />
level, and typically undertaken by a specialist national<br />
regulator. However, there will be many common aspects<br />
between the regulatory process for different airports<br />
and ANSPs. As such, a forum should be available for<br />
best-practice benchmarking, both in terms of revealing<br />
additional information for the regulator and for regulated<br />
companies and users to assess the performance of their<br />
regulators.<br />
Length of agreements.<br />
Regulatory agreements should normally cover periods in<br />
the order of four to five years. This provides sufficient<br />
time for a regulated company to develop procedures,<br />
implement charges and extract cost efficiencies.