ABSTRACT
The Competition Commission has taken the unusual step of issuing a statement on its current thinking during the course of its review of London and Manchester Airports charges … The statement points out that the Commission has not reached a final view on the issue [the CAA’s proposals for a dual-till approach] and that it remains open to further representations on the point. […] My comments follow after the quotations taken from the Commission’s statement. […]
Typically, airports combine provision of runway/terminal services with a retailing and property business. At large airports the latter account for a substantial turnover, which can exceed the turnover from aeronautical services. The two activities are complementary and consequently increases in air traffic volumes will usually produce significant increases in the profitability of the retailing/property activities. This provides an incentive for the airport to increase traffic volumes and has the effect of attenuating the normal downward pressure on profits that arises when prices for the use of runways, etc. are lowered to attract more traffic: airports with substantial commercial activities have good reason to limit the extent to which they exploit their market power as runway businesses. (Some airports are reported to be offering runway terminal services at negligible or zero charges in order to enhance commercial profits).
