1. An Empirical Assessment of Aviation Charges in Germany Presented by Plamena Ivanova (HU) Marius Barbu (FHW) David Hörnle (FHW) GAP Workshop Berlin 10th April, 2008 Based on Diploma Thesis of Chi Wah Li, 2007

2. Plamena Ivanova, Marius Barbu, David Hörnle 2 Outline Methodology Development of Charges, Passengers and Revenues, Timeline Airplane Related Charges in 2007 Share of Passenger Charges in Airside Charges, 1998-2007 Airside Charges in 2007 Fixed vs. Variable Charges in 2007 What is the Welfare Effect?

3. Plamena Ivanova, Marius Barbu, David Hörnle 3 I. Methodology

4. Plamena Ivanova, Marius Barbu, David Hörnle 4 Airport Landing fee 2007 A320- 200 BRE653,42 CGN732,89 DRE548,31 DUS380,12 FMO671,79 FRA278,23 HAM615,34 MUC653,39 STR409,95 1.What do these numbers mean? 2.Can we rank the airports based on these fees? 3.What further assumptions are necessary? Methodology of benchmarking

5. Plamena Ivanova, Marius Barbu, David Hörnle 5

6. 6 Methodology of benchmarking 1.Step Identify the charges you are going to compare Landing fee Passenger fee Security fee Noise fee Central Infrastructure

7. Plamena Ivanova, Marius Barbu, David Hörnle 7 2. Step Identify the fleet mix Helpful: use similar types of airports which serve the same fleet mix, otherwise might be difficult to compare. The results obtained are vaild only for one airport Is the fleet mix changing over time? Shall it be adjusted over the period under consideration? Methodology of benchmarking

8. Plamena Ivanova, Marius Barbu, David Hörnle 8 3. Step Make specific assumptions about the types of passengers DomesticEUNON EUTransitTransfer Methodology of benchmarking Düsseldorf (2008): Domestic: 13,45 EUR EU: 14,55 EUR Non EU: 14,60 EUR Transit/ Transfer 8,25 EUR

9. Plamena Ivanova, Marius Barbu, David Hörnle 9 4. Step Determine the load factor – might be useful to obtain the data in the future directly from the airports Differenciate low cost airlines vs. „traditional“ airlines Methodology of benchmarking

10. Plamena Ivanova, Marius Barbu, David Hörnle 10 5. Step Charges we ignored (Groundhandling) Ramp equipment and Aircraft handling charges (fueling) Transportation charges (crew, passengers, baggage) Security, x-ray charges Customs reporting systems Others Methodology of benchmarking

11. Plamena Ivanova, Marius Barbu, David Hörnle 11 Having determined the previous components, we can now proceed with computing the charges according to: 4. Step Choose a time period – time changes and all parameters too 5. Step Choose a currency – domestic, specific or artificial Methodology of benchmarking

12. Plamena Ivanova, Marius Barbu, David Hörnle 12 6. Further assumptions Time of the day – day or night Peak or off-peak periods Parking time for aircrafts As this is the most sensitive point within the analysis, the assumptions concerning these issues should be based on actual empirical data or substantiated through interviews. Methodology of benchmarking

13. Plamena Ivanova, Marius Barbu, David Hörnle 13 II. Some preliminary results and further research questions

14. Plamena Ivanova, Marius Barbu, David Hörnle 14 Charges, Passengers, Revenues Development, Timeline ~ -17% ~ +34% ~ +43% Total real revenues of all German Airports (incl. non-aviation) Total PAX in Germany Airside real charges for Turnaround-Flight (given assumptions)

15. Plamena Ivanova, Marius Barbu, David Hörnle 15 Research Question Airside prices are falling but total revenues are increasing –Increase in passengers –Increase in nonaviation Assumptions: –Either fleet mix has changed or –airports discount charges or –loading factor changed or –increase in landside revenues? Or....

16. Plamena Ivanova, Marius Barbu, David Hörnle 16 Airplane Related Charges, in 2007 Average Level of Charges for a Turnaround Flight, in 2007 Big Airplanes Medium Airplanes Small Airplanes Charges per Turnaround Flight According to Airplane Size, in 2007

17. Plamena Ivanova, Marius Barbu, David Hörnle 17 Research Question Why is the slope of big-airplane-charges not increasing steadily? Does FRA‘s monopoly position play a role in it‘s charges structure? How about Dresden? Are airports trying to increase their traffic with low charges?

18. Plamena Ivanova, Marius Barbu, David Hörnle 18 Airside Charges, in 2007 Share of Passenger Charges in Airside Charges (§43), in 2007: Share of Airside Charges (§43) in Total Charges, in 2007:

19. Plamena Ivanova, Marius Barbu, David Hörnle 19 Fixed vs Variable Charges of Total Charges (§43 + ZI), in 2007 How is the share of variable charges influencing airports performance? How about the allocation of risks?

20. Plamena Ivanova, Marius Barbu, David Hörnle 20 Share of Passenger Charges in Airside Charges, 1998 - 2007 There is an increase of aprox. 65 % over the period 1998-2007 Does this also increase the risk of airports?

21. Plamena Ivanova, Marius Barbu, David Hörnle 21 What is the Welfare Effect for… Airports (Income and Risk)… Airlines (Income and Risk)… Passengers (Prices)… Society (Quality of Transport Services, Risks)?

22. Plamena Ivanova, Marius Barbu, David Hörnle 22 Thank you for your attention! A Joint Project of: Berlin School of Economics (FHW) University of Applied Sciences Bremen Int. University of Applied Sciences Bad Honnef G ERMAN A IRPORT P ERFORMANCE