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Airports – natural monoplies? I don’t think so

Written by Aviation Advocacy on . Posted in TWTWTW

The legacy airlines are repeatedly in print (in ICAO submissions and elsewhere) noting that all airports are natural monopolies – a view, not surprisingly, the airports dispute. So, clearly, does the UK Competition Authority. In March it ordered that BAA, the owner of several airports in the UK, including three in London and three in Scotland, dispose of two London airports (Gatwick and Stansted) and one of Glasgow or Edinburgh. If the airports were actually natural monopolies, ownership would be irrelevant. What would need to be regulated would be behaviour. The Competition Authority in fact decided that by changing ownership and pitting different operators against each other competitive forces will be brought into play. In coming to this conclusion they have further isolated the IATA position. The usual argument against this proposed remedy is that each airport caters to a different mix of airlines and passengers and complex issues such as the interplay between slot restrictions and interline passenger flows mean that airlines have little choice about where to fly. On this analysis, little can be done to make each airport competitive with the others. Therefore, it is hard to overestimate the importance of the second arm of what was obviously a coordinated pincer movement. For some reason, it was less heralded and commented on, but it was equally important. The UK government announced a change of policy on the supervision and regulation of airports. From now on, all regulation must be focused on the experience of the passengers, rather than the airports’ direct and actual customers, the airlines. This must be seen as a naked grab to go over the heads of the traditional airline argument and to shake up these allegedly natural monopolies. NetJets Europe also has its own self help approach – they have purchased an entire airport near Frankfurt to ensure that they have the slots and the customer service facilities that they need to run their operations. AirAsia considered the same thing in Kuala Lumpur. Which part of airport competition don’t the legacy airlines get? There would have been another way for the Competition Authority to do this – break down ownership at each airport at the terminal level. That would have sidestepped the interline/slot argument. It would have then allowed each airport to focus on the infrastructure that its airline customers need, but each terminal to focus on the passenger experience. Such a move would bring the privatisation of aviation infrastructure in line with the privatisation of most other public infrastructure entities, such as rail and power – by considering the customer service issues apart from the provision of the underlying infrastructure. Currently in both airports and air navigation service provision that is not the case.

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