EC charges report shows no misuse of airport market power: ACI Europe

The European airport industry has reacted to the findings of a new report about airport charges by the European Commission which demonstrates that new market dynamics have resulted in increasing competitive pressures upon airports of all sizes across Europe, limiting their market power.

Commenting on the report which evaluates the effectiveness of the current EU directive on airport charges, Olivier Jankovec, the director general of ACI EUROPE said: “The Commission’s report has rightly identified the key drivers of increasing airport competition: from the relentless development of low cost carriers and their move up market into primary airports to the multi-hub strategies of powerful full service carriers and their alliances – and the expansion of a number of non-European carriers which are courted by airports globally.”

ACI Europe notes that the report points to airports in Europe generally not being in a position to misuse any market power.”Indeed,” it said, “the report does not validate airlines’ tired allegations that airports exhibit excessive profitability levels, that they overcharge for the use of their facilities and that the ‘dual till’ system reflects excessive market power.”

Jankovec added: “If there is one thing that comes out very clearly from the Commission’s analysis, it is that airports’ market power has significantly diminished in Europe over the past 10 years. Today, 98 per cent of Europe airports offer incentives and rebates to attract and retain airlines’ business and develop their connectivity. Surely, if airports did not face competitive pressures, they would not need to do that. Similarly, the fact that at industry level charges paid by airlines only cover 80 per cent of airports’ operating costs and do not even contribute to investment and capital expenditure is striking.”

Further reflecting these new competitive dynamics, ACI Europe said the Commission’s report also points to the ability of airlines to exert dominance upon airports to block or delay their investment in capacity or quality. “Doing so allows them to limit airline competition and charge higher fares – to the detriment of consumers and connectivity developments,” it complained. It said clear evidence was presented to the Commission about the extent of this problem and its implications.

While ACI EUROPE concurs with and supports most of the analysis conducted by the Commission, it however raised concerns at the disconnect and lack of alignment between this analysis and some of the initial conclusions of the report.

“If – as the report shows – the Commission is unable to prove and conclude that airports are able to misuse whatever market power they may still have, how can it consider at the same time that the risk of such market power being misused persists in any significant & systemic way?” Jankovic pointed out.

“This contradiction needs to be resolved and it does raise questions as to the objectives sought by the Commission. It is also shows that the Commission has not taken on board all of the implications of current national regulatory frameworks that go well beyond the principles set out in the Airport Charges Directive. Indeed, charges at most major European airports are already reviewed and set by national regulators. Subsidiarity is and should remain a prerequisite in this regard.”

Another ACI Europe concern is that the evaluation report saw regulation as the solution to every problem.

“In all of the questions posed during the evaluation, the report states that the objectives set by the existing directive are largely being achieved, but that more could be done, with more prescriptive rules. However, experience across many industries in Europe shows that the best way to allow markets to operate efficiently and deliver better outcomes is actually for regulators to step back –  and let commercial entities resolve their own supply agreements, under the protection of the EU’s robust competition rules.”

Finally, ACI Europe said it also considers that sustainability and the climate emergency also need to be part of the evaluation of the EU Airport Charges Directive. “Apart from the fact that airports will need to invest in the full decarbonisation of their facilities, this issue is about ensuring coherence with the user pays principle.”