ABSTRACT
This chapter starts with Frankfurt airport and then looks at the airports of Stuttgart, Hannover and Hamburg. It suggests that the airport system as a whole is in a situation of persistent overcapacity, but at the same time, there exist partial capacity shortages because the price mechanism does not work effectively. The chapter argues that the current practice lacks economic rationality and leads to an inefficient allocation of resources. It looks critically at the rules of the game, namely the current cost based regulation of airports. The chapter argues that this type of regulation is not appropriate for overcoming the current misallocation of resources and should be reformed. It also argues that price cap regulation should be part of a larger reform of setting incentives for an efficient static and dynamic allocation of airport resources. The chapter discusses the capacity problem at German airports by looking at the situation before 9/11 and the forecast situation for the year 2010.
