European airports with more than 5m passengers per annum are regulated by the Airport Charges Directive (ACD), but the European Commission is considering whether to revise this.

Oxera, in partnership with CMS, and on behalf of ACI Europe, developed a new practical way for member states to determine which airports face effective competition and could therefore be subject to reduced degrees of regulatory intervention. The process involves a two-stage significant market power (SMP) test followed by a remedies stage. It also identifies airports that are not (yet) facing significant competitive constraints and for which some form of regulation may be required. Regulation can then be calibrated to the assessed degree of market power. This process is more aligned with those used in other sectors, and is expected to lead to better outcomes for customers.

Overall, our proposed approach should assist in fostering the continuing development of airport competition. Furthermore, regulation would be applied only where needed and in proportion to the degree of market power and consequent risks. The practical process should also make the application of market power tests tractable for individual national regulators, while maintaining a common framework of principles and safeguards at a European level.

In November 2018, the Thessaloniki Forum proposed the use of criteria to distinguish airports that may have market power from those that do not, in order to inform decisions about undertaking market power assessments, and apply appropriate economic regulation. These proposals take account of many of the elements of the framework developed by Oxera and CMS for ACI Europe.