P. Forsyth, PRICE REGULATION OF AIRPORTS - PRINCIPLES WITH AUSTRALIAN APPLICATIONS, TRANSPORTATION RESEARCH PART E-LOGISTICS AND TRANSPORTATION REVIEW, 33(4), 1997, pp. 297-309
This paper analyses the various issues that are likely to arise with p
rice regulation of privately owned airports. It begins with a brief ba
ckground on Australian airports, and a review of regulatory experience
elsewhere. Issues which can create problems for price regulation incl
ude congestion, noise and other externalities, quality degradation and
underinvestment, and the choice of the initial price level. Price reg
ulation limits the use of prices as rationing devices where congestion
is present. Efficient handling of congestion can be reconciled with p
rice caps if the regulator determines the appropriate congestion/capac
ity trade off, and supervises allocation of slots, e.g. through auctio
ns or creating a market for slots. Noise externalities can be handled
through noise charges set by a regulator who may also be called upon t
o resolve capacity/noise trade offs. Resolving the problem of quality
degradation and underinvestment is inherently difficult, and may need
to involve active participation in investment decisions by the regulat
or and airlines. The difficulties of setting initial price levels aris
e from conflicts in ensuring that existing assets are utilised efficie
ntly, and that prices give efficient signals for future investment. Re
gulatory design issues, dealing with whether pure price caps or mixed
regulatory rules are superior, are examined in the airport context. Th
e paper concludes with a brief examination of the price regulatory reg
ime as announced by the Australian government. (C) 1997 Elsevier Scien
ce Ltd. All rights reserved.