Two New European Directives on Airport Charges: Airport Charges between Competition Law and Sector-Specific Regulation

By Jochen Meulman

In the past year, the European Communities’ legislative adopted a Directive regulating airport charges; meanwhile, a proposal for a Directive on airport security charges was submitted for approval by European Parliament and the Council of Ministers. Although in many economic sectors in which third-party access to infrastructure is essential, access charges have been regulated at the EU level, airport tariffs had so far escaped direct and general European legal scrutiny. Indirectly, and on a case-by-case basis however, airport charges have been the subject of the EU’s attention, mainly in cases in which such charges were suspect from the view of European competition law. Now, finally, a common legal framework for setting airport charges has been devised, which will – at the very least – render such charges and the procedures leading up to their determination more transparent. Whether lower tariffs for the use of airport-related services will ensue from this new regulation, will be discussed in this contribution. After a brief description of the background to airport tariffs and their regulation under EU competition law hitherto, this contribution will identify denominators common to both mentioned directives. Next, both directives and their impact on airport charges will be discussed, with a focus on their overlap with EU competition law. Finally, two questions will be answered; (1) to what extent do EU competition law and the new Directives overlap? (2), will the new legislation lead to lower charges for airport users?

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Beware of the Middleman – How to Deal with Travel Agents from an Airline and Customer Perspective

When the scientific fathers of the new institutional economics developed the theories around the Principal-Agent Problem (Akerlof 1970), they focused more on markets such as fruits, cars and insurances rather than on the travel industry, though which they certainly would have looked at today if they had to reinvent those theories.

Even in today’s environment, with tools like Internet booking engines, metasearch engines and other tools to book airline fares, the majority of sales is still driven by the travel agency community. This applies to the more traditional network carriers in particular. The relationship between travel agents, their customers and the airlines is thus an important subject, from both a management and a scientific perspective.

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Determinants of an Airport Productivity Benchmark

branko_bubaloBy Branko Bubalo

Today’s airports are expansive and expensive infrastructures with considerable impact on population and the environment. In the past, we have seen almost unconstrained exponential growth of air transportation in the Western world, which has been fueled by deregulation and partial privatization of air transportation in the U.S. and in Europe. Today, North-American and European markets as well as major routes have matured considerably. Therefore, future growth of demand will happen in the Asian and in the Middle-Eastern markets, simultaneous with increasing wealth, consumption, and education. Having a functional and efficient infrastructure is essential for future growth in all economies. The European market will not stagnate at the current level; Europe will continue to serve as a gateway between the Americas and Asia, and it will grow, on average, at a comparably lower rate. There will be considerable growth at Eastern European airports. This results in a doubling of traffic or passengers in the next 16 to 20 years, putting currently congested airports under enormous pressure. The question for European institutions and policy is: Do European airports have the capacity to serve future demand or will there be a widening capacity gap?
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Coordinating Spatial Development in Airport Regions

OrlyBy Veronique Galvin

While most international airports are broadly recognized as strategic territories within their metro areas, Amsterdam stands out as an international example of coherent development in Europe. Orly is Paris’ second and oldest international airport, specialized in cargo and the French domestic market. Local stakeholders in Paris tried to define a coherent land strategy, taking into account numerous actors and territories, taking Schiphol as a possible reference study. Although both of them are quite different types of airports (one is a domestic and cargo airport, the other an international hub), in terms of managing spatial development in the densely built urban areas, a relevant comparison can be made, and lessons can be learned.

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FAST: Future Airport Strategies

Although airline strategies will be the main drivers of traffic evolution, the airports are by no means passive, and their own strategies will have an impact on airline behavior and route development.

The FAST project methodology analyzes the potential evolution of airport strategies in the next decade according to a typology of airports that was designed for this purpose. It also analyses the potential impacts of future strategies on traffic distribution at airports.

Aeropolitics – Transportation Issues, Policies and R&D Series

Book Review by Erwin von der Steinen

Aeropolitics, by Professor Dr, Ruwantissa Abeyratne, is a both a provocative and demanding book. In a way, it is three books in one. That is, there is the stated theme that defines ‘aeropolitics’ as the governance processes of air transport to be viewed from a global perspective, including consideration of the increasing impact of transnational interests and stakeholders on policy formulation and execution. Second, it is an extensive and intensive review of the functioning of the International Civil Aviation Organization (ICAO), for whom the author has served in executive capacities. Third, there is a large number of diverse issue discussions, some of which could be termed mini-case studies.

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The German Aviation Tax, will it last ?

Germany is introducing in January 2011 an aviation tax (luftverkehrsabgabe). Germany is not the first nor will it probably be the last to introduce a Ticket Tax. Other countries abolished it recently. What are the chances for the German Ticket Tax ? First we walk along a number of countries with aviation tax experience. Then I come back with my expectation about the Luftverkehrsabgabe.


 

The UK introduced an APD (Air Passenger Duty Tax) back in 1994. The tax was gradually raised and differentiated towards distance. At this moment the tax is 11 Pounds for a short haul flight (< 2000 miles) and 55 Pounds for a long haul flight (>6000 miles). From November 2010 the rates will be lifted to 12 – 85 Pounds. Non-economy tickets pay the double.


France also has such a tax since July 2006, it is only 1 Euro inside Europe and 4 Euro outside the EU. The rate for non-economy is tenfold. The destination of the money is determined by law; the millennium target for poor countries (UNITAID). In France there is no opposition to the Taxe de Solidarité sur les billets d’avion worth mentioning.

Malta too introduced a Departure Tax of 23 Euro. One that did not apply to its own citizens. This was in contravention to EU rules however, so it was changed to 12 Euro for every outbound passenger. The Ticket Tax was cut in 2008.


The Danish had a ticket tax that was quickly withdrawn due to the adverse effects on the economy and the tourism sector in particular. The tax was repealed in 2007, mainly due to the syphoning of passengers to the Swedish airports Malmo and Goteborg. Curiously enough, the Swedish government attempted to get a Departure Tax through parliament in that same period (2006). The procedures followed the usual pattern: Ryanair threatens to leave, the tourism sector complains, the unions are against the proposal and a strike of the personnel on Goteborg and Malmo-airport looms. This puts the socialist Swedish government under heavy pressure. The socialists lose their majority at the elections and the new government shelves the Ticket Tax.


The Dutch government introduced a ticket tax in July 2008. It was sold as an eco-plan. Dutch air travelers made a much wider use of German and Belgian airports. The financial crisis deteriorated the economy, the tourist sector suffered. As part of a economic recovery plan the tax was abolished exactly one year after the introduction. After the Dutch, the deficit-burdened Belgian government came in October 2008 with proposals for a Ticket Tax. The plans were heavily attacked. The Ticket Tax never made it to parliament. Ireland followed in 2009 with a tax of 2 Euro for Intra-Ireland Flights and 10 Euro for European Flights. Ryanair withdrew airplanes from Irish Airports. The German government introduces a major overhaul of national finances in May 2010. A part of this Sparpaket is a ticket tax. It is also being sold as an eco-surcharge. After some initial skirmishes the proposal is 8 Euro for European flights, 25 for mid-range flight and 45 for the long haul. No taxes on Freight or Transfers.


The EU ponders levying taxes directly. Taxes on aviation, financial transactions and CO2 emission permits are all possibilities. The European Union has introduced legislation to include aviation in the EU emission trading scheme (Directive 2008/101/EC about EU ETS). From 2012/2013 airlines should pay for their CO2-emissions.


This short summary of the Ticket Tax in various European countries shows that there is a strong, permanent pressure from environmental and fiscal considerations to also subject the aviation sector to ‘normal’ taxes. This concerns VAT, which is not levied on tickets (this has been introduced on domestic flights in most countries). Furthermore there is the lack of excise duty on aviation fuel, which has been pushed to high levels for the most important mode of transport (car) and is an important source of state revenue.


The countries that have successfully introduced a lasting Ticket Tax are the UK, who have cautiously increased the tax-rate and who do not have to fear passengers voting with their feet by using the expensive channel tunnel. Ireland is looking to follow the same path, despite the severe consequences from Ryanair. France keeps their rates low, has a politically popular destination for the money set by law and their major airports have no significant competing alternative airports within a 2 hour radius. Additionally, at present the constant (fear of) passengers walking away to foreign airports has forced governments of adjacent countries to either cancel plans for a Ticket Tax or to repeal shortly after introduction. This brief history shows that the continental European countries that have attempted a Ticket Tax would have had more success if they had done so together. One wonders why there was no political coordination between the countries.


And the German Luftverkehrsabgabe, will it last ?


To my personal opinion there will be adverse effects for German aviation but it will bridge the time-gap to the ETS.


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