Revenue and investment management of privatized airports and air navigation services—a regulatory perspective

Abstract

Along with the burgeoning need for an increase in airport capacity to accommodate the demand for increasing air transport capacity comes the issue of proper fiscal management of income derived by airports and air navigation services providers. Airports are showing much success at earning income from shopping malls, car parks, boutiques and other similar activities within the airport premises. Non-aeronautical revenues, as this income is called, has risen from 30% of the total airport revenue in the late eighties to 52% today. Airports are keen on using their commercial revenues to help cover the costs of huge investments being made on infrastructure. However, the “single till” approach, which is widely used and takes into account both charges imposed on airlines and passengers for using aeronautical services and income derived from non-aeronautical activities as a single income source when setting charges, has been criticized as creating a cross subsidy whereby profits from commercial activities are used to offset aeronautical costs. Intrinsic to the issue of revenue and investment management are considerations of cost pricing and liability and duties imposed upon a privatized entity, which in turn have to be managed if successful revenue and investment management were to be accomplished.