Auctioning capacity at airports

Abstract

Market mechanisms for slots need a clear definition of capacity. This paper suggests that a slot should be treated as a bundle of various aspects of airport capacity, combined in flexible proportions according to the type of air movement. Ancillary rules to prevent the build-up of market power would be required in any market mechanism for slots. Slot auctions have considerable potential to increase economic efficiency, though there is also a complementary role for secondary markets. The need for economic regulation of airports will not be removed simply by auctioning slots, though the price signals provided by auctions can be used to improve the planning of airport capacity expansions. Even if receipts from auctions are used to fund capacity expansions, there is likely to be excess revenues due to the scarcity of airport capacity caused by environmental and planning constraints.