Adequate airport capacity is crucial to allowing the global economy to grow. Present
regulatory arrangements are not efficient because the airline and airport markets
have changed enormously over recent years. There is scope to do much better.The challenge
is to create conditions for efficient infrastructure development in a sector where
in some circumstances some airports have market power and might abuse this position.
It is important that regulatory intervention only occurs where it is actually needed
as it is costly in terms of administrative effort and altering the market. All regulatory
controls on the pricing of aviation services carry the risk of getting investment
incentives wrong. A number of regulators are beginning to experiment with this key
control, with promising results.This report reviews recent experience with airport
regulation on the basis of discussions at the International Transport Forum between
leaders of airlines and airports together with regulators and economists. Liberalisation
of aviation markets combined with privatisation of most airlines, and now many airports
have changed aviation markets rapidly and profoundly. Regulatory models have tended
to evolve more slowly and need reform if they are not to become a drag on global growth.