Airport competition in Europe

This paper analyses the development in competitive constraints faced by European airports resulting from the wide-ranging changes to the European aviation market over the last twenty years, encompassing deregulation of airline markets and more cost focused airline business models. We argue that the flexibility and choices now available to airlines constrain the commercial behavior of airports. The main change driving these competitive constraints is that the wealth of opportunities available to airlines have made them more footloose. In addition to this, passengers have more choice available to them, and airports are actively responding to market changes. The result is that airports now largely have to compete with one another to retain and attract traffic. The marked development of airport competition in Europe leads us to recommend that policy makers use a more case-by-case approach to economic regulation of airports. In particular, market power should be established, not assumed.