Airport Charges: Looking for the Right Scope Olivier Jankovec, Director General, ACI EUROPE PSE Seminar on Airport Charges Brussels, 18 September 2007

KEY ISSUES Should the proposed scope be maintained? If not, how should it be changed? What about pre-financing of airport infrastructures?

THE EC PROPOSAL: A BIASED ASSUMPTION The EC impact assessment: “Airport competition exists on various levels. However, in general competition between airports is judged to be relatively limited” THE REALITY: the vast majority of airports do not exercise market power competition between airports airlines buyer power > airport market power Increasing competition from surface modes How often have airlines actually lodged complaints about the level of charges?

Airport charges are market driven at most airports THE GERMAN EXAMPLE Airport charges are market driven at most airports

THE EC PROPOSAL: THE WRONG SCOPE 1 Million pax: Arbitrary Incorrect indicator of market power Will be quickly outdated In 2005: about 144 airports impacted... BUT …in 2011: 36 additional airports impacted! 180 AIRPORTS IMPACTED UPON ENTRY INTO FORCE

IS RAISING THE PASSENGER VOLUME BETTER? 5 Million pax? Arbitrary Incorrect indicator of market power It will be quickly outdated In 2005: about 55 airports impacted... BUT …in 2011: 15 additional airports impacted! 70 AIRPORTS IMPACTED UPON ENTRY INTO FORCE

IMPACT OF THE PROPOSED SCOPE High costs for big and small airports (accounting, consultation, arbitration): Small airport (Newcastle) : €1,3 million Big airport (Manchester): € 7million Depending on: size complexity of the operations number of airport users Regional impact: disproportionate and unjustified burden for smaller airports! Unnecessary costs throughout the system! Undermine investments! Undermine development of airport competition!

SCOPE DEFINITION: ESSENTIAL PREREQUISITES We need targeted regulation: substitution to deficient market conditions Absolute need to reflect the reality of the market Existing competition dynamics Diversity of situations (no-one-size-fits-all) Evolutionary situations Promote a uniform European regime (all Member States) Combine LEGAL CERTAINTY and FLEXIBILITY (better regulation) This can not be achieved with a fixed passenger volume criterion!

COMBINING LEGAL CERTAINTY AND FLEXIBILITY Target the top 25 EU airports + At least 1 airport/MS = Better indicator of market power FLEXIBILITY Reflect actual situation of abuse of dominant position irrespective of airport size

THE OPT-IN/OPT-OUT CLAUSE Based on a competition assessment What is it? Test to determine whether or not an airport operates in a competitive environment and abuses its market power Who should conduct it? The Independent National Regulator or National Competition Authority How should it be carried out? Market definition Determination of “relevant market” Market power assessment  Consideration of the competitive constraints within the relevant market

THE OPT-IN/OPT-OUT CLAUSE (2) CRITERIA SHOWING ABSENCE OF MARKET POWER No dominant national market share Easily available/nearby substitute airports Competitive charges Spare capacity, also available in substitute airports. Slots have little or no value Airline and route turnover at high levels or increasing Significant marketing and sales development undertaken Good and improving service quality, active efforts to lower operating expenditure No Regulation is necessary !

IS THE COMPETITION ASSESSMENT SOMETHING NEW FOR EU MEMBER STATES? NO KEY CONCEPT under EU law since 1957 Used to assess anticompetitive conducts in all sectors Widely enforced by the EC (DG COMP) and all National Competition Authorities PRECEDENT IN OTHER SECTORS: Electricity sector – Directive 2002/19/EC Market power test based on competition assessment is the criteria mandated to National Regulatory Authorities whether regulation should apply In contrast, where no market power is found, regulation must not be imposed and existing regulation must be withdrawn

PRE-FINANCING New infrastructure is needed to meet future demand To avoid the capacity crunch To promote airline competition Pre-financing is a valid option To lower financing costs of infrastructure development To smooth the increase in charges Pre-financing is recommended by ICAO, subject to some safeguards Transparency Substantive consultation with airlines (NO VETO power) Application for a limited time period, depending on the scale of the project Pre-financing is already in several national legislation Pre-financing counter-balances the fact that airlines have no commitment to airports

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