4.2. MARCO TEÓRICO…
4.2.2. Bases legales que justifican la misión de servicio público en
8.4.3.1. Impact on passenger numbers
In order to illustrate the potential impact of applying higher posted prices (in isolation, ie without secondary trading in addition to the higher prices), we have in the first instance applied the methodology described in Appendix E that we used to estimate the impact of an ideal market mechanism. However, for our central estimate, we have instead assumed that prices are set at each airport, and for each hour, so that excess demand is reduced but it still exceeds the available capacity by 5 per cent.101 For our low and high estimates, we have
assumed this percentage to be 7.5 and 2.5 respectively.
In addition, to take account of the potentially disruptive impact of higher posted prices on airlines’ schedules and planning, plus the difficulties created when supply exceeds demand and therefore slots are re-advertised at lower prices, we have reduced the overall volume of air traffic movements in each year by 0.5 per cent for each of our estimates.102
Further detail on our assumptions, and the rationale for them, is provided in Appendix E, Section E.4.
The resulting impact of higher posted prices on passenger numbers for the low, central and high cases is shown in Table 8.1.
101 Where estimated excess demand is already at or below these levels, we assume that there is no higher posted price,
but instead the existing airport charge continues to apply.
102 If schedules are expected to change significantly from year to the next, the capacity declaration must necessarily
adopt a conservative approach to allow for changes in the nature of services (such as a different mix of aircraft sizes, or different terminal requirements)..
165 Table 8.1
Increase in Passengers under Higher Posted Prices (without secondary trading)
Higher posted prices alone Ideal market
mechanism Low Central High
LHR 7.2% 5.5% 5.8% 6.2%
LGW 4.8% 3.9% 4.0% 4.2%
CDG 9.1% 5.1% 5.9% 6.8%
MAD 7.6% 2.8% 3.5% 4.8%
VIE 11.4% 4.1% 4.8% 7.0%
Weighted average over
all Cat 1 airports 7.2% 3.8% 4.3% 5.2%
Source: NERA estimates
Note: The weighted average is calculated for all Category 1 airports, including those with little or no excess demand.
In the medium to long term, our central case suggests that the introduction of higher posted prices, even without secondary trading, might increase the number of passengers using Category 1 airports by about 4.3 per cent. There is less uncertainty about the impact of this option than that of secondary trading – where airlines’ responsiveness to opportunity cost is unknown – and auctions – where airlines’ ability to participate is unclear – and so the range of estimates is smaller.
Given total forecast passenger numbers at Category 1 airports in 2007 of 719 million, higher posted prices (without secondary trading) would under central case assumptions result in an increase in the number of passengers travelling through these airports of about 31 million per year.
8.4.3.2. Implementation costs
As with secondary trading, the introduction of higher posted prices will add a new complexity to the financial evaluation of proposed services, which will impose certain costs on airlines. The costs of additional financial evaluation necessitated by higher posted prices will be less per slot than that for secondary trading, because the financial commitment is smaller, but more slots would be affected. Using a similar approach to that for secondary trading, our estimate of costs incurred by airlines in planning and executing the slot purchase equate to approximately 0.5 per cent of the posted price of the slots.
A substantial burden of implementation costs will fall on airport operators (or whichever body is responsible for setting posted prices). Among other things, they will now have to:
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• produce detailed forecasts of the demand for slots at different times of the day, week and year, and also with different assumptions about the level and structure of prices; • in support of this, undertake research to increase their understanding of airlines’
likely response to price changes. This might include a mixture of informal discussions with airlines, analysis of experience elsewhere, and a detailed analysis of responses to previous price changes.
To the extent that some prices are too high, and therefore slots remain unsold, both airport operators and airlines could then become involved in a further iteration of the slot allocation process, as these slots are re-advertised at reduced prices.
The amount spent on setting, administering and, if applicable, regulating a posted prices regime will be related to the complexity of the tariff structure and the size of the revenue collected, which in turn would both be influenced by the extent of airport congestion. We have estimated settled down costs in the range of €100,000 to €800,000 per airport per season for the partially and highly congested airports. The outturn costs might be somewhat higher than this during the early stages of implementation as information is being acquired about airline responses both to “own price” changes and also responses to changes in prices at other congested airports.
We have already noted that there are substantial legal issues to be tackled before this option is implemented. It is not clear that legal disputes would not continue to arise, where airlines would challenge the principle of posted prices, for some time after a system had been introduced.
However, if we assume that the system is established and not subjected to fundamental legal challenge, we estimate that the cost of implementing higher posted pricing would under central case assumptions be around €24 million a year across EU Category 1 Airports as a whole (2007 figures). This is equivalent to €0.03 per passenger, or €0.8 per extra passenger passing through the airports as a result of introducing higher posted prices.
8.4.3.3. Impact on airline competition
Our analysis suggests that the effects of higher posted prices in the absence of secondary trading on conditions of competition in airline markets will differ quite widely between airports. In the London system, the large increases in slot prices are assumed that will be needed to clear, or almost clear, the market are likely to squeeze out a significant volume of demand from non-aligned, non-low cost airlines, creating opportunities for low cost carriers to increase their slot holdings at LGW (see Table 8.2). Even in the absence of secondary trading, the higher posted price mechanism should therefore result in a significant increase in competition in short haul markets, probably to a greater degree than under secondary trading (see Chapter 7).
167 At less congested airports, in contrast, the increase in slot prices would be less than in the London system, and hence the pressure on lower value users to relinquish slots would also be less severe. Nevertheless, the implementation of higher posted prices should allow some opportunities for entry by low cost carriers at these airports, even if the likely scale of entry may not be quite as high as under secondary trading. This should result in increased competition on some short haul routes.
As with secondary trading, moreover, we expect that the introduction of higher posted prices will lead to both an increase in the number of long haul services, and also increased competition on some high density routes from airlines such as Virgin or possible new entrants. Both of these factors are likely to place downward pressure on fares on long haul routes.
Table 8.2 also confirms that, in general, we do not believe the introduction of higher posted prices will lead to a large change in the share of slots held by hub carriers and their alliance partners at congested airports. As with secondary trading, both hub carriers and their competitors are likely to increase their slot holdings at these airports, and so we expect there to be very little change in their respective shares of slots held at each airport.
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Table 8.2
Competition under Higher Posted Prices (without secondary trading)
Current Ideal market
mechanism
Higher posted prices alone (central case) Hub alliance share of long haul movements
LHR 45% 44% 44%
LGW 37% 24% 25%
CDG 58% 59% 58%
MAD 51% 51% 51%
VIE 82% 82% 82%
Average (all Category 1 airports) 53% 52% 52%
Hub alliance share of short haul movements
LHR 48% 59% 57%
LGW 54% 39% 41%
CDG 53% 54% 54%
MAD 45% 43% 45%
VIE 73% 70% 73%
Average (all Category 1 airports) 51% 51% 51%
Low cost airlines’ share of short haul movements
LHR 0% 0% 0%
LGW 13% 40% 38%
CDG 3% 7% 4%
MAD 1% 5% 2%
VIE 0% 6% 1%
Average (all Category 1 airports) 3% 7% 5%
Source: NERA estimates
Note: The weighted average is calculated for all Category 1 airports, including those with little or no excess demand.
8.4.3.4. Impact on the environment
Like all market mechanisms, higher posted prices will several effects on the environment, mainly reflecting:
•
increases in the total number of air traffic movements, as a result of both an increase in peak time movements and some switching to off-peak periods;•
a shift from short to long-haul services; and•
an increase in the number of passengers per flight.In our central case, we estimate that the introduction of higher posted prices (without secondary trading) would lead to an increase of about 2.3 per cent in total air traffic
169 movements, but the number of long-haul movements would increase by about 4.7 per cent. The environmental costs (per passenger km) that would result from these changes are shown in Table 8.3. These unit costs fall by about 2.9 per cent.
Table 8.3
Environmental Costs under Higher Posted Prices (without secondary trading) (€ per 1000 passenger kilometres)
Current system Ideal market mechanism Higher posted prices alone (central case) LHR 4.25 3.95 3.98 LGW 4.33 4.29 4.29 CDG 4.28 4.10 4.15 MAD 4.38 4.33 4.36 VIE 4.38 4.24 4.33
Average (all Category 1 airports) 4.30 4.13 4.17
Source: Derived from applying environmental parameters (DfT 2001) to NERA model of slot allocation
Since the number of passenger kms also increases, we estimate the net environmental impact of higher posted prices, across at all Category 1 airports, to be about €450 million per year in our central case. As set out in Section 6.9.1, however, this impact may be reduced if higher posted prices lead to reductions in traffic at other airports or delays to airport expansion plans.