Evaluating the potential impact of alternative airport pricing approaches on social welfare

Abstract

One of the key issues air transportation policy-makers face is whether it is preferable from a regulatory perspective for airports to adopt a single-till or dual-till pricing approach. This study analyzes the potential loss of social welfare as a result of adopting a single-till or dual-till approach in three airport pricing scenarios. Findings show that the single-till approach is preferable where excess capacity of aeronautical services exists, while the dual-till approach is preferable where capacity is fully utilized or already over-utilized. A single-till approach induces airports to bear financial losses from aeronautical services and subsequently a cross-subsidy by profits raised from non-aeronautical activities is required. The dual till-approach enables congested airports to break even on aeronautical service and pursue profits from non-aeronautical activities.