Light-Handed Regulation of Airport Services: An Alternative Approach to Direct Regulation?

Abstract

The concept of light-handed regulation, including light-handed approaches to the regulation of airport services, is discussed. The rationale for the economic regulation of airport services and the traditional approaches used for economic regulation of airport charges are summarized. The evolution of international practice of light-handed regulation is outlined, including the experience with minimal regulation across monopoly industries in New Zealand and the acceptance of “negotiated settlements” in utility industries in North America. General reasons for moving to light-handed regulation of airports include the disadvantages of the price cap approach in practice and the benefits of facilitating greater negotiation between airports and users. Comparisons are made between alternative approaches to light-handed regulation of airport services, including price and quality of service monitoring, information disclosure regulation and negotiate-arbitrate regulation, approaches that have been applied to airport services in Australia and New Zealand. The role and nature of the incentives under each approach are discussed. The chapter concludes that whether light-handed regulation provides a suitable alternative approach to direct regulation depends on the market circumstances and the design characteristics of the light-handed approach.

Citation

Arblaster, M. (2017), "Light-Handed Regulation of Airport Services: An Alternative Approach to Direct Regulation?", The Economics of Airport Operations (Advances in Airline Economics, Vol. 6), Emerald Publishing Limited, Leeds, pp. 15-47. https://doi.org/10.1108/S2212-160920170000006002