by Nick Fincham and Alina Jardine-Goad, UK CAA
Note: summary amended 1 March 2010
The UK airports sector is undergoing significant change in light of the sale of Gatwick by BAA and the possibility of further sales remains. This introduces the possibility at least of competition becoming a constraint on airport pricing. The UK Civil Aviation Authority (CAA) – a long-standing supporter of proportionate economic regulation - has launched two initiatives to help inform its airport regulatory role going forward. Since the UK has previously been influential in shaping the thinking about regulatory design it is important that the industry understands what is being undertaken, and how this work might be used. The studies plan to produce evidence and analysis for the purpose of:
- Assessing airport competition. The CAA is seeking to develop an approach for assessing the degree of competitive pressure faced by an airport both to ensure its analysis supporting any consideration of regulatory withdrawal is robust and to deal with any competition law cases that may arise. Developing further understanding on the role of scarcity, the nature of the modern airport business, and the impact of EU aviation market liberalisation are the main issues being considered. But it will also be important for the study to also assess the barriers airlines face in switching airports, which may well hinder other potentially competitive constraints on airport pricing.
- Understanding the impact of regulation on the development of competition. While recent policy moves may indicate that airports are considered to be more influenced by competitive forces, the emergence of additional competition may not remove the need for continuing regulatory oversight entirely. Competition may take a little time to develop fully, arguably providing a potential rationale for some form of continuing economic regulation to protect airport users during a transitional period. The principal purpose of this project is therefore to consider ways to improve the current approach and identify alternatives to the current regulatory asset based method for setting price controls.
The CAA recognises the importance of engaging stakeholders in this process. By working closely with industry stakeholders – airports, airlines and others – the CAA wishes to ensure that its work is fully informed about industry practice and that its decisions and decision making process is transparent. The CAA therefore intends to encourage participation by arranging bilateral and multilateral meetings with stakeholders throughout the projects and by hosting stakeholder forums to discuss issues as they arise.