ABSTRACT

The first structured system for the economic regulation of airports was established by the UK Government in the 1986 Airports Act. The intention of the regulation system was to capture the best features of private ownership and management, whilst ensuring that airports did not unreasonably exploit their market power. The RPI-X approach to regulation was first adopted for airports as an extension of the principle originally devised as a temporary method of regulating telephone charges levied by British Telecom, until competitors emerged in the telecoms industry. Interestingly, when the system of airports regulation was first established, little attention was given to service quality, and the issue did not even emerge in the first review in 1991. The two-regulator model, with the Civil Aviation Authority taking decisions, advised by the Competition Commission, contrasted with other sectors in the UK in which the single-sector regulator prevails, with the Competition Commission used only on appeal.