New study finds airline competition and airport capacity drive air fares, not airport charges

ACI EUROPE has published new research challenging the assumption that lower airport charges translate into lower air fares, highlighting the decisive role of airline competition and airport capacity in determining ticket prices instead.

The study synopsis, What Really Drives Air Fares, is based on an extensive analysis by Oxera covering more than 62,000 data points across nearly 6,000 European air routes. Released as the European Commission reviews the EU Airport Charges Directive and Airport Slots Regulation, the findings underline the need for policy reforms to strengthen competition and improve the use of scarce airport capacity.

The analysis finds that a 10% increase in airport charges is associated with a 0.35% rise in air fares, compared with 0.93% for airport congestion and 1.06% for airline concentration. The entry of a new airline on a route is associated with fares that are 6.7% lower, while an airline’s withdrawal is associated with a 9.7% increase. Capacity constraints also allow airlines to benefit from scarcity premiums, estimated at €6.4 billion annually, equivalent to €13.54 per one-way ticket at congested airports. These effects extend beyond major hubs, affecting airports across Europe wherever capacity is constrained.

The priorities for policy makers and regulators are clear:

• modernise airport slot rules to create the conditions for effective airline competition;
• maximise the efficient use of existing airport capacity;
• enable airport investment to meet demand, resilience, decarbonisation and connectivity needs;
• put the passenger at the core of regulation by assessing policy from the passenger’s perspective, not only that of the airline.

To support these objectives, ACI EUROPE has also relaunched its updated Position Paper on Airport Slots, setting out proposals to modernise EU and UK slot regulations. These include facilitating genuine airline competition, improving the use of airport capacity, increasing transparency in slot allocation, and giving airports a greater role in ensuring capacity serves their communities’ connectivity needs.

Find out more:

• STUDY: What Really Drives Air Fares
• POSITION PAPER: ACI EUROPE’s updated Position Paper on Airport Slots