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Conference on Airport Competition: Competition between airports is feasible


Airport competition is feasible, although it is recommended that the scope of this competition be analysed in each particular case, and in some airports the need for regulation may persist. This is the main conclusion to be drawn from the Conference on Airport Competition (Barcelona, 19 November), organised by the Barcelona Economics Institute and the FEDEA-Abertis Chair.

In his paper, Professor H.M. Niemeier (University of Bremen) reported that airports compete with each other in different market segments. Thus, they compete to attract traffic in local markets with overlapping areas of attraction; connecting traffic – i.e., hub competition; airfreight transport and airline company headquarters. Yet, given the technological characteristics of airports, competition is not always feasible. There exists evidence of competition between small and medium-sized airports – for example, between the airports of the UK and, to a lesser degree, between those in Germany. However, the large airports can enjoy considerable market power. As a result, the feasibility of competition between airports needs to be assessed on a case-by-case basis.

Likewise, Professor Peter Forsyth argued that where competition was fierce, regulation was unnecessary. In situations of market power, regulation should be designed in such a way as to foster competition, avoiding the restrictions that might impede it. Competition can be promoted using policies aimed at the liberalization of international bilateral agreements, the reduction of integration between airports and the boosting of the slots market.

At the same time, public policy actions that might distort competition in the market need to be avoided. Based on an analysis of the situation in Canada and the United States, Professor Mike Tretheway presented the possible sources of the distortion of competition. He argued that the marketing policies implemented by airports can be positive for competition. In the case of public subsidies, he stressed the need for a rigorous evaluation so as to avoid any possible distortions in market functioning. Mike Tretheway also examined the question of privatization en bloc compared with that of the individual privatization of airports. He pointed out that the first of these options ensures higher sales revenues, yet if what is required are efficiency gains then the best course of action is individual privatization so as to promote competition between airports.

The conference was concluded with a round table discussion on the development of air routes. The panel comprised members of the Barcelona Air Route Development Committee as well as the guest speakers mentioned above and a representative of Abertis Airports (Bob Bullock). They highlighted the reasons for the need to promote those routes in airport markets subject to greater competition and the factors that determine their effectiveness.