European Airports and Airlines: Evolving Relationships and the Regulatory Implications

25 Pages Posted: 18 Jan 2011 Last revised: 19 Feb 2020

Date Written: January 17, 2011

Abstract

The purpose of this paper is to question the need for a special regulatory framework for European airports in the light of recent developments in the relationship between airlines and airports; to argue that the airport business should now be treated like most other industries and be subject only to normal competition law. Three factors underlie the changed relationship. These are: the creation of a single European aviation market; the development of airline business models operating on a pan-European basis; and the increasing use of the internet which has reduced the costs of entry for airlines into local (geographic) markets. In combination these factors have had a profound effect on the dynamics of the airline industry. These dynamics have increased the business risk faced by airports and highlighting the increased buyer power of the airlines. The result has been a shift to bespoke long term contacts between airports and airlines. The paper argues that the bespoke contracts are also incentive compatible from the passenger’s point of view and, in combination with the incentive that airports have to secure high-margin commercial sales to passengers, produce an outcome that is favourable to the passenger; direct airport competition merely guilds the lily. Any residual concerns regarding market dominance and possible abuse have then to be set against the significant disadvantages and costs of sector-specific economic regulation; increasingly the remaining competition issues are of a type better handled through the application of normal competition law.

Keywords: airports, competition, regulation, airlines

JEL Classification: L51, L93, L14

Suggested Citation

Starkie, David Nicholas, European Airports and Airlines: Evolving Relationships and the Regulatory Implications (January 17, 2011). Available at SSRN: https://ssrn.com/abstract=1742253 or http://dx.doi.org/10.2139/ssrn.1742253

David Nicholas Starkie (Contact Author)

Case Associates ( email )

1 Heddon Street
London, W1B4BD
United Kingdom

HOME PAGE: http://www.casecon.com

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