Abstract This paper analyses the price responses of airports to a demand collapse, such as that prompted by Covid-19. In the crisis, airports need to achieve viability, in the short run through sufficient liquidity, and in the long run, by covering costs. From a public policy viewpoint, price increases in a crisis are argued to be undesirable, as they would further jeopardise the viability of airlines and tourism as well as the wider economic transport benefits such as connectivity. The institutional environment of airports differs from airport to airport; some are publicly owned, others are private but regulated, and others face competition. The price response of each (of 6) types of airport is considered, and how policy could respond to keep prices low in the crisis while ensuring longer term viability. Regulated airports could defer price increases until demand had recovered, if regulators insisted they do so. Publicly-owned airports could be directed by governments to keep charges low. Governments might also state that unregulated airports that raised charges could be made subject to price regulation in the future. Competitive airports would be unable to raise charges but this could jeopardise their viability. In this case and others where airports might need financial assistance, assistance could be made conditional on keeping charges low in the crisis.
Highlights Airports would adjust their charges in different ways to a large demand decline. Competitive airports would not be able to raise charges but monopoly airports and those subject to many kinds of regulation could do so. Price increases would be inappropriate from the viewpoint of supporting airline and tourism viability and wider economic benefits such as connectivity. Governments may need to intervene with regulators. Where the demand decline is due to government policy, financial assistance for airports may be appropriate.
Covid −19, the collapse in passenger demand and airport charges1 The authors wish to thank Brian Pearce of IATA and Michael Stanton-Geddes of ACI for helpful discussions and data, and also two anonymous referees for their comments.
2020-09-05
Article (Journal)
Electronic Resource
English
IATA slams 'arbitrary' charges, CIS seeks IATA ticket-sales advice
Online Contents | 1993
IATA-Intercarrier Agreement on Passenger Liability
Online Contents | 1997
IATA Vienna airport traffic forecast : 1977 - 1992
SLUB | 1978
|