April 3, 2008

Airport Pricing

  • Jerry Ellig

    Research Professor, George Washington University Regulatory Studies Center
  • Mark Adams

Key materials
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The Regulation

The U.S. Department of Transportation has proposed a new rule that would change the way most airports charge for runway use in three ways: Airports would be permitted to combine existing weight-based fees with a fee for the congestion each airline imposes on other users. Operators with multiple airports could shift fees onto flights at the most congested airports. Operators of congested airports could include the costs of airfield projects under construction in their fees.

Our Findings

Delays caused by congestion impose substantial costs on airlines and passengers alike. A significant proportion of this cost could be avoided if airports were allowed to charge carriers for the congestion they impose on other runway users. When congestion pricing is combined with increased investment, passengers and carriers are the main beneficiaries. By creating incentives for airlines to use existing capacity more efficiently, congestion pricing will not lead to a major reduction in available seating.

Recommendations

The DOT should proceed with the proposed rule changes. The Department should require airports to compare the new fees with the social costs of congestion at that airport, and adjust their pricing accordingly.