Message from the Director General

May 2018

Set in 2015, the United Nations Sustainable Development Goals (SDGs) call on the international community to pledge a plan of action based on 17 global targets. SDG 9, “Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation,” is directly pertinent to the airport industry and the economies that it serves around the globe. Being fundamental gateways to countries, airports have a significant role to play in the UN’s SDGs. However, the scale of current and forecast demand at many airports clearly indicates a need for increasing levels of investment to maintain and enhance capacity at an appropriate level of service quality and to eventually build more resilient and long-lasting infrastructures.

As it has been for years, airport operators continue facing the challenges of upgrading their infrastructure, adding much-needed capacity to cope with traffic growth and improving their service quality to the passengers.  While airlines consistently require additional infrastructure, increased capacity and higher service levels, they routinely oppose assuming the cost of such provision of airport facilities and services, disconnecting the request of developing airport to accommodate the current and future demand from the funding of such development through charges. This is a naïve and immature expectation.

With global traffic reaching the 7.7 billion passenger mark in 2016 and expected to double by 2031 based on a projected growth rate of 4.9% per annum, it is imperative for airports to have a long-term perspective on their business and ensure capacity improvements. In this dynamic competitive environment, our industry is encouraged to set competitive charges, offer incentives and rebates, and invest in quality enhancements to maximize their benefits to effectively meet the challenges of traffic growth. The claim by airlines that a reduction in their airport user fees will create savings for passengers is not only unsubstantiated but is belied by past behavior.

Gaining the permission to grow and obtaining financing are often the major challenges that airports must address in order to accommodate growth in demand.  Calls for tighter and rigid economic regulation for airport charges must be founded on sound principles.

The role of regulators and their oversight function is to protect the consumer. The application of competition laws, robust measures of competition and market-power tests on the pricing of airport services must be data-driven. Heavy-handed forms of price regulation, particularly in the face of limited or no evidence of market power abuse results in allocative inefficiencies which affect economic incentives adversely. The penalty is ultimately on those that depend on airports to accommodation the demand for passenger and cargo service air service. Economic oversight of airports should be always applied at an optimal level to safeguard the long-term interests of the public.

ACI urges regulators to consider the asset-incentive nature of airport businesses and that any necessary regulatory framework on charges to be based on the following key principals:

• A proportionate regulatory framework, if needed, should facilitate and incentivize commercial agreements between airports and airlines in a flexible manner, rather than burdening stakeholders with unnecessarily strict rules and procedures;
• Ensure that all State Members abide by the ICAO charging principles and that their national regulations expressly recognize the need for airport charges to reflect capital expenditure incurred by the modernization and development of airport infrastructure necessary to meet expected traffic demand;
• Facilitate cooperative relationships between airlines and airports rather than incentivize conflicts; and
• Recognize that the pre-financing of infrastructure development is a valid option for both airlines and airports, as it allows the lowering of overall financing costs and smoothen charge increases.

Infrastructure is a long-term issue – it takes years to design and bring to life and requires the acceptance of a broad range of interested parties. It would be unfortunate for the industry itself to be the impediment to the accommodation of air service demand by pursuing short-term pyrrhic victories.