Market Power : Airports - Vertical Integration between Airports and Airlines
In the late 1980s and the 1990s many countries privatized airports or concessioned their operation. The United Kingdom began the trend, followed by other countries adopting new forms of infrastructure ownership and management. To control infrastruc...
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| Format: | Viewpoint |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2003/03/2459548/market-power-airports http://hdl.handle.net/10986/11304 |
| Summary: | In the late 1980s and the 1990s many
countries privatized airports or concessioned their
operation. The United Kingdom began the trend, followed by
other countries adopting new forms of infrastructure
ownership and management. To control infrastructure
licensing and the "natural monopoly"
characteristics of some airport services, governments
developed regulatory policies for airport systems. The
operation of an airport creates incentives to transfer the
airport's market power to the air transport market. If
the airport market is regulated but the airport operator is
allowed to control at least one airline, those incentives
can give rise to anticompetitive practices aimed at
displacing competing airlines. When the regulatory framework
for airports lacks explicit rules about such vertical
integration, that can have consequences for competition in
the air transport market. Australia and Chile, for example,
have an explicit prohibition on vertical integration. By
contrast, Argentina has no restrictions on vertical
integration leaving it to the antitrust agency to decide
whether to approve or reject a vertical merger. Airlines
provide air transport services by combining aircraft,
personnel, airport services, and other inputs. Airports
supply a series of services to air transport companies and
to passengers. Aeronautical services (rescue, security,
firefighting, infrastructure supply, runway and taxiway
maintenance). Aeronautical-related commercial services
(catering; supply of fuel and lubricants; baggage,
passenger, and aircraft assistance). Commercial services
(banks, hotels, restaurants, car rental, car parking, retail
shops, duty-free shops). |
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