Airport Regulation Investment and Development of Aviation
Adequate airport capacity is crucial to allowing the global economy to grow. Present
regulatory arrangements are not efficient because the airline and airport markets
have changed enormously over recent years. There is scope to do much better.
The challenge is to create conditions for efficient infrastructure development in
a sector where in some circumstances some airports have market power and might abuse
this position. It is important that regulatory intervention only occurs where it is
actually needed as it is costly in terms of administrative effort and altering the
market. All regulatory controls on the pricing of aviation services carry the risk
of getting investment incentives wrong. A number of regulators are beginning to experiment
with this key control, with promising results.
This report reviews recent experience with airport regulation on the basis of discussions
at the International Transport Forum between leaders of airlines and airports together
with regulators and economists. Liberalisation of aviation markets combined with privatisation
of most airlines, and now many airports have changed aviation markets rapidly and
profoundly. Regulatory models have tended to evolve more slowly and need reform if
they are not to become a drag on global growth.
Published on November 26, 2010