Market forces

Written by: James Hanson
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How will competition improve airport ANS?

Smaller regional airports struggle to cover their costs and the situation in Europe is exacerbated by regulations. One regulation requires airports with between 200,000 and 3 million passengers per annum to reduce their dependence upon public financial support whilst another requires costly safety management processes to be implemented. It is little wonder that experts are questioning the inclusion of terminal navigation charges − one of the main sources of airport revenue − in charging regulations that will only tighten the financial squeeze on airports.
Airports are responding by putting pressure on their ANS providers to reduce costs. This has energised lower cost ANS initiatives such as remote towers, and in some cases led to pressure on governments to open the market for airport ANS provision.

Whilst tendering the service contract will undoubtedly lead to cost reductions for the airport − a claim made by ACR at Swedish airports where they provide ANS and by Air Navigation Solutions Ltd where they are displacing NATS as the ANS provider at Gatwick − there are also other issues at stake. For example:

  • Is there enough 'supply' in the controller market to replace those unwilling to transfer from the displaced provider?
  • Do airports own the ANS assets and have sufficient knowledge of those assets to tender their replacement, operation and maintenance?
  • Will regulatory authorities accept the certificate of others State's providers without duplicating oversight duties?
  • What is the right contract term to limit monopolistic behaviour whilst also encouraging more innovation and investment?
  • How much of a transition period is needed to manage transfer within an acceptable level of risk?
  • Should approach services be included as part of the service contract and if so, where is the boundary with the en-route provider?

These issues are amongst the many that we recommended solutions for, in recent work for the Norwegian government. The situation there being further complicated by an airport operator that owns the ANS provider, some unique military requirements and large pension liabilities. Ultimately though, a competitive ANS market will undoubtedly lower costs for airports, and whilst the challenges may be complex, none represents an insurmountable barrier to market liberalisation.

For more information contact James Hanson.

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