User charges analysis

Air Navigation Services Providers (ANSPs) and Airports are either natural monopolies or generally operate with substantial market power, facing little competitive pressure on their pricing.  While firms in competitive markets cut prices in the face of falling demand during recessions, infrastructure providers have tended to raise their ‘user charges’.  Since these charges make up around 11% of the cost of air transport this is a significant issue.

Key findings include:

• ANSPs and airports did not raise their prices during the 2001 downturn, but this was largely due to the exceptional circumstances following the 9-11 terrorist attacks.  During the 1991-2 recession enroute charges rose by about 18%, at the same time as the rate of increase in prices in the broader economy was moderating.  Without increased competition – from measures such as the BAA break-up - or robust economic regulation, the risk is for a similarly large rise in infrastructure prices during the current recession.
• The latest data available shows total infrastructure user charges paid by airlines and their customers, was at least US$ 54.2 billion in 2007, representing about 11% of total operating revenues. This estimation is based on figures published by ACI and ICAO and captures the total economic impact of user charges for airports’ and ANSPs’ infrastructure. This figure does not include US FAA payments.
• Assuming that the total infrastructure user charges cost remains at 11% of airline operational revenues, airlines and passengers are expected to pay about US$ 58.1 billion in 2008.
• ACI report that aeronautical airport related revenues rose to US$ 42.0 billion in 2007 from US$ 38.0 billion in 2006. More than half (55.5%) of this revenue originated from passenger related charges, the rest being generated from aircraft related activities.
• In 2007, ACI reported that European airports account for 53.0 % of airport aeronautical revenues but only 34.0 % of global air passenger traffic.
• Airlines have made significant progress in achieving non-fuel cost efficiencies since 2001. However, user charges have not kept in step with other non-fuel costs. For the 3 main European network airlines, user charges, on a per passenger basis, have either increased or decreased at a much slower rate.