Airline competition and airport capacity matter more for fares than airport charges, study finds

Airline competition and airport capacity have a significantly greater influence on European air fares than airport charges, according to a new study commissioned by ACI EUROPE and carried out by economic consultancy Oxera.

The analysis, titled What Really Drives Air Fares, examines more than 62,000 data points across nearly 6,000 European air routes and challenges the long-standing argument that reducing the fees paid by airlines to airports necessarily results in cheaper tickets for passengers.

The findings arrive as the European Commission reviews both the EU Airport Charges Directive and the Airport Slots Regulation, while slot allocation rules are also under debate in the UK.

According to Oxera, a 10% increase in airport charges is associated with an increase of only 0.35% in air fares.

By comparison, a 10% increase in airport congestion is linked to a 0.93% rise in fares, while a similar increase in airline market concentration pushes fares up by around 1.06%.

The results suggest that the structure of competition and the availability of airport capacity have a materially stronger effect on what consumers ultimately pay.

Scarce airport capacity creates a €6.4 billion premium

One of the most significant conclusions of the study concerns airport congestion.

When available capacity becomes scarce, airlines operating at constrained airports can capture what Oxera describes as scarcity premiums, translating limited runway and slot availability into higher fares.

The phenomenon is not confined to major international hubs such as London Heathrow. According to the study, similar effects can be observed wherever airport capacity is constrained across Europe.

Oxera estimates that these scarcity rents currently amount to approximately €6.4 billion per year, equivalent to around €13.54 per one-way ticket at congested airports.

The findings add an economic dimension to the long-running debate over airport expansion and slot regulation.

Limited capacity does not simply restrict the number of flights that airports can accommodate. It can also reinforce the position of incumbent airlines, making it more difficult for new competitors to enter attractive routes and putting upward pressure on ticket prices.

New airlines can cut fares by almost 7%

The impact of airline competition is even more visible when carriers enter or leave specific routes.

Oxera found that the arrival of a new airline on a route is associated with fares that are 6.7% lower.

The opposite effect is even stronger when competition disappears: the withdrawal of an airline from a route is associated with fares that are 9.7% higher.

These figures strengthen the case for policymakers to look beyond airport operating costs when assessing passenger affordability.

For Olivier Jankovec, Director General of ACI EUROPE, the findings directly challenge the argument that lower airport charges automatically benefit consumers.

“All this clearly challenges the premise that keeping airport charges down necessarily benefits consumers,” Jankovec said.

He argued that the issue has frequently been framed around airline operating costs rather than the final prices passengers pay.

“Lower airport charges are simply not passed through to passengers in lower fares,” he said.

Airport charges can still influence where airlines deploy aircraft and develop route networks, but the study finds no direct one-for-one relationship between lower airport fees and lower ticket prices.

ACI EUROPE shifts attention towards competition and capacity

For the airport industry, the findings point towards a different set of policy priorities.

Jankovec said Europe should focus on strengthening airline competition, using existing airport capacity more efficiently and ensuring sufficient investment in airport infrastructure to meet future demand.

“All of this has a real impact on what consumers pay, as opposed to controlling one visible airline cost — airport charges — especially at a time when airlines are consolidating and increasing their market power,” he said.

The study therefore enters a wider European policy debate over how aviation infrastructure should be regulated as airlines consolidate and demand for scarce capacity at major airports remains strong.

From ACI EUROPE’s perspective, existing slot rules can restrict competition if they make it too difficult for new operators to secure meaningful access to congested airports.

The association argues that slot regulation should do more to ensure that capacity is allocated efficiently and in a way that supports connectivity.

Pressure builds for reform of European slot rules

Alongside the publication of the Oxera study, ACI EUROPE relaunched its Position Paper on Airport Slots, outlining proposals to modernise current regulations.

The recommendations include strengthening rules for new entrants to encourage genuine airline competition, improving the use of scarce airport capacity, increasing transparency in slot allocation and giving airports greater influence over how capacity is distributed.

ACI EUROPE also wants airport operators to have more ability to ensure that slot allocation reflects the connectivity needs of the regions and communities they serve.

Jankovec argued that reforming slot rules has become important not only for passenger prices but also for the competitiveness and resilience of Europe’s aviation system.

“These policy priorities are essential to safeguard the competitiveness and resilience of our European aviation market,” he said.

He also pointed to the Draghi Report, which had already highlighted the need to improve the functioning and competitiveness of European transport infrastructure.

The central economic message from the Oxera analysis is that policymakers may have been focusing too heavily on one visible cost in aviation.

For passengers, the study suggests, the more important question is not simply how much airlines pay airports, but how many carriers are able to compete for their business and whether airports have enough capacity to accommodate that competition.