Edited by André de Palma, Robin Lindsey, Emile Quinet and Roger Vickerman
Chapter 34: Airport Governance and Regulation: Three Decades of Aviation System Reform
David Gillen INTRODUCTION This chapter examines the evolution of airport governance and regulation over the last 30 years and assesses the case for privatization.1 In this period the aviation system has been subject to significant change in the delivery and organization of air services but much less so in the organization and delivery of infrastructure services. Today, airports in developed economies are run as modern businesses, or at least in a commercial-like way. There has been a transition from positioning airports as public utilities to being multi-product firms delivering airside services to a range of airlines, and terminal retail and access services to passengers, plus additional ancillary services to other parts of the aviation supply chain. Interestingly, the study of airport performance and price setting under differing governance structures has only recently attracted the interest of economists. A large part of the reason was that until the late 1990s, with the exception of the UK, airports were owned by some level of government that treated them as a public utility and in many cases used them as a device for some broader policy initiative. The fact that airports seemed to cover their costs, and needed government support for investment, provided some evidence that airports had not, and presumably would not, use any market power. The issues that had previously occupied economic analysts were not pricing and market power, but rather congestion pricing to allocate scarce capacity, undertaking benefit–cost studies to assess proposed capacity investments and developing strategies to mitigate...
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