European passengers are paying excessive airport charges, particularly at monopoly airports, new research claims.
The study on the cost and profitability of European airports by consultancy York Aviation was commissioned by Europe’s largest airline association A4E.
The average ebitda (earnings before interest, tax, depreciation and amortisation) margin of York Aviation’s sample of airports was 46% – double the 23% margin of the top 100 airports referred to by the EC in its 2015 aviation strategy.
This indicates the “extraordinary levels” of profitability of Europe’s largest airports.
The study also looked at returns to an airport business relative to its cost of capital. If returns are substantially in excess of the cost of capital, this is evidence of a situation in which airports enjoy significant market power and are using this to price excessively.
The analysis identifies such returns in excess of cost of capital as ”economic profit” or ”supernormal” profit.
More than 85% of the entire sample of airports generate what could be called ”supernormal” returns.
The study also reveals that neither airlines nor the relevant regulators in each EU member state are provided with sufficient transparency on the level of airport charges.
A4E managing director Thomas Reynaert said: “The European Commission’s current regulatory evaluation process is an important step in addressing the abuse of market power by some European airports.
“We look forward to concrete outcomes from this process, proceeding to the formulation of the new legislation necessary to tackle the supernormal returns by airports, which are bad for consumers, bad for tourism, bad for national economies.
“We call on the EC to accelerate its evaluation. We must proceed now from analysis to action.”
Reynaert also hit out at airports adopting a so-called ‘dual-till’ regime, where profits from commercial activities such as shopping or parking are not re-invested in lowering airport charges for consumers, despite the fact that this revenue would not be generated without them in the first place.
“The existence and proliferation of dual-till airports demonstrates that airports don’t operate in a competitive market and that they abuse their market power,” he claimed.
“We are strongly convinced that single till is the model which benefits European passengers most and should be introduced across the continent.”
The single till principle requires revenues from an airport’s non-aeronautical activities, such as shopping, car parking and restaurants, to be deducted from overall revenue for aeronautical services before determining the level of airport charges.