Negotiate-arbitrate regulation of airport services: Twenty years of experience in Australia

• The economic rationale for using a negotiate-arbitrate approach is discussed.
• The case history of negotiate-arbitrate regulation of airport services is reviewed.
• Changes in the regulatory design have had important effects on using this regulation.
• In Australia negotiated outcomes have resulted and arbitrations avoided.

Negotiate-arbitrate regulation has played a role in the economic regulation of airports in Australia since the introduction of a national access regime in 1995. Over a twenty year period there have been three cases where negotiate-arbitrate regulation (NAR) has been applied to airport services, two cases where a decision has been made to not apply negotiate-arbitrate regulation to services provided and a case where an airline has sought to apply NAR and then withdrawn its application. The experience of the application of NAR to airport services is examined against a background discussion on issues associated with countervailing power in airport services. Based on the experience, some observations are made which reflect advantages and disadvantages of the application of NAR to airport services. NAR has provided a targeted approach to economic regulation of airport services in Australia, involving negotiated outcomes and limited intrusion into the aviation markets.