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The future airline-airport relationship and the question of market power
Journal of Airport Management,
13
(4),
322-334
(2019)
Abstract
Airlines and airports want an efficient regulatory framework that facilitates the growth of the European aviation industry. Greater cooperation could be foreseen on issues such as sustainability. European Union rules on airport infrastructure will be a source of disagreement. Competition between airlines has improved the affordability of and access to air travel in the past decades. Those gains, however, may be offset when airports with significant market power (SMP) exert this power to charge excessively and earn returns above the cost of capital. This paper summarises proposals devised to assist the European Commission in developing a streamlined approach to identify SMP and regulate airports with market power only. Adopting screening tests could provide an accurate indication of whether an individual airport is likely to have SMP. An airport that fails these tests would be considered as likely to have SMP and suitable regulations would be imposed. Regulators would retain discretion to assess market power through an ordinary review in special circumstances, even when the tests are passed. Using these tests would avoid the need to perform full market power assessments and to impose the related burden on all stakeholders, while keeping market power under suitable scrutiny. They are designed to provide a practical way of identifying airports with SMP based on data that can often be readily obtained. Such tests would require assessing (i) the proximity of an independently owned airport, (ii) the existence of spare capacity, and (iii) the consistency of the airport’s pricing behaviour with effective competition.
Keywords: airport charges; market power; competition; European Commission; regulation; SMP
The full article is available to subscribers to the journal.
Author's Biography
Thomas Reynaert is Managing Director of Airlines for Europe (A4E), Europe’s largest EU airline association, since March 2016. A4E was founded in January 2016 by Air France-KLM, easyJet, International Airlines Group (IAG), Lufthansa Group and Ryanair. Prior to joining A4E, Thomas was President of United Technologies (UTC), International Operations (Europe), where he led their European government relations activities between 2008 and 2015. During this time, he provided counsel to the corporation and its business units on EU rulemaking and policy and served as a corporate liaison for key decision-makers in the EU institutions and national governments. Prior to joining UTC, Thomas led the government relations and regulatory affairs team for Nortel Networks in EMEA (Europe, Middle East and Africa), beginning in 2000. Before that, he was Director of EU public affairs for Lucent Technologies (today ‘Alcatel-Lucent’). Thomas served as a member of the Supervisory Board of the UTC Company OTIS Management GmbH (Germany) from 2008 to 2014. From 2011 to 2015 he was Chair of AmCham EU’s Security and Defense Committee, and in 2015 he was appointed a Member of the Executive Committee of the European Centre for Public Affairs (ECPA).
Nils Von Hinten Reed is a founder and Managing Director of CEG’s European operations. Nils has provided expert advice in a wide range of competition and commercial litigation cases before competition authorities in Europe and Asia-Pacific, court proceedings and international arbitrations. Nils has led teams on competition cases involving the economics of cartels and damages cases, abuse of dominance issues, and mergers and joint ventures. Nils has also led teams on the economics and finance of commercial issues. Recent experience includes expert testimony in the UK Competition Appeals Tribunal and High Court on behalf of Sainsbury’s against MasterCard and Visa in damages claims concerning interchange fees; expert evidence in the largest telecoms arbitration between T-Mobile and Vivendi; Polish Oil and Gas Company arbitration against Gazprom; and numerous competition cases before the European Commission and national authorities. Nils’s industry experience spans the aviation, banks, basic and specialty chemicals, electricity and natural gas, finance, insurance, maritime, media, pharmaceuticals, ports, post, rail, telecommunications, transport, and retailing sectors. Nils’s airline experience includes work for the International Air Transport Association (IATA) on the Commission’s review of the IATA Block Exemption on Interlining and the equivalent Australian Competition & Consumer Commission (ACCC) review, cartel defence in Air Cargo, and the assessment of short-haul joint ventures (JVs) in Europe. Nils is included in Global Competition Review’s 2018 list of recommended competition economists and the Expert Guide to the World’s Leading Antitrust/ Competition Lawyers and Economists. Nils has also been included in WWL’s (Who’s Who Legal) 2019 List of Competition Thought Leaders.
Barbara Veronese is a Director at CEG Europe and leads the Italian office. She features regularly in the recommended competition experts’ lists of the Global Competition Review and Expert Guides. She provides economic advice in competition, disputes, regulation, auctions and spectrum policy, and procurement mechanism design. She has advised private and public sector clients on national and EU-wide matters, across a range of sectors, including transport, energy, food, beverages, chemical, heavy industries, cement, pharmaceutical, medical devices, rentals and leasing, consumer goods retailing and electronics markets. She advised AGCOM on the ex-ante tests to prevent margin squeezes; mobile and fixed operators on a range of regulatory and competition matters, including water-bed effects and spectrum liberalisation; and Ofcom on the impact of wholesale interconnection arrangements on performance and welfare outcomes in mobile communications markets. She also provided support to participants in spectrum auctions in Europe and continues to support to bidders in ongoing European 5G auctions. Prior to joining CEG, at Ofcom, in the competition group, she focused on competition assessments and on spectrum policy, while at NERA in the transport economics group, she advised private and public sector clients on regulatory and competition matters. Barbara has a PhD and MSc in Economics from the London School of Economics (LSE). While at the LSE, she was a Junior Fellow of the Royal Economic Society and lectured undergraduate and postgraduate students. Barbara holds a first-class undergraduate degree (Laurea with Summa Cum Laude Honours) in Economics from the University of Venice.
