Handbook of Research Methods and Applications in Transport Economics and Policy
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Handbook of Research Methods and Applications in Transport Economics and Policy

Edited by Chris Nash

Transport economics and policy analysis is a field which has seen major advances in methodology in recent decades, covering issues such as estimating cost functions, modelling of demand, dealing with externalities, examining industry ownership and structure, pricing and investment decisions and measuring economic impacts. This Handbook contains reviews of all these methods, with an emphasis on practical applications, commissioned from an international cast of experts in the field.
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Chapter 14: Airport pricing and investment

Ginés de Rus and Ofelia Betancor


Airport pricing and investment can no longer be analysed as if the industry were a homogeneous group of regulated public companies in a world of perfect information without budget constraints. In the last decades, airport ownership has changed from a model of public utility to another, more commercially oriented, one with different degrees of private participation but with a common objective concerning the requirement of generating revenues to at least break even, including the opportunity cost of capital. The move to a more profit-oriented environment has occurred after the liberalization of the downstream airline market (see Chapter 19; also Winston and de Rus, 2008). In this environment, where many airports are still operated under public ownership and many others have seen the rise of private participation, price regulation covers the whole spectrum from cost-plus to fixed-price or even deregulation with light handed regulation. Price regulation is still passionately discussed: single-till versus dual-till and its relation with congestion pricing, the incentives and the risks associated to different forms of price control, and its effects on investment decisions. All are key issues in a world where the marginal cost pricing criterion for public utilities has led the way to other sorts of price mechanisms based on the need to keep incentives for cost minimization, to avoid the exercise of market power and to allow for a reasonable return on capital to the shareholders compatible with long-term investment in capacity, and all this in a context where the degree of competition varies widely in different locations and routes (Morrison and Winston, 1989; Starkie, 2008; Gillen, 2011).

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