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Far-reaching changes to the aviation sector in the European Union over the last two decades have included, among other things, deregulation of the airline service sector, the formation of the EU common aviation market, the recent signing of an EU-U.S. open-skies agreement, a gradual move toward airport privatization, and a continuing evolution of airport regulation and slot allocation reform. The goal of this paper is to examine the continental EU experience with changes to economic regulatory policy and capacity allocation through slots (a slot is the right to take off or land at an airport during a specific period of time) and the effect of these changes on airport operations and economic efficiency.1 It is difficult to assess changes to airport regulation without also examining privatization initiatives and how they have varied across European states. We therefore include a brief description and assessment of privatization plans across member states.2 3 The European Union: Evolution of Privatization, Regulation, and Slot Reform david gillen and hans-martin niemeier 36 We are indebted to Christiane Müller-Rostin,Vanessa Kamp, and Haibin Huang for excellent research assistance as well as to students in Transport Economics, Bremen University of Applied Science, who assisted with data collection. We also thank David Starkie and Peter Forsyth for useful comments on earlier drafts as well as participants at the workshop on Comparative Political Economy and Infrastructure Performance: The Case of Airports, held in Madrid in September 2006. In addition we are grateful for constructive and helpful comments from two anonymous referees. The research was partially funded by the research project GAP (German Airport Performance), supported by the Federal Ministry of Education and Research, Germany, and by the Centre for Transportation Studies, University of British Columbia. 1. This chapter excludes discussion of airports in the United Kingdom; Anne Graham discusses U.K. airports in chapter 5. 2. Numerous other reforms have occurred, such as deregulation of ground handling and substantive changes in airline market structure. These have been driven by several factors 03-9395-3 CH 03 2/29/08 2:08 PM Page 36 The shift to more market-oriented policies in the ownership and management of airport infrastructure reflects a position that airports can improve their cost efficiency and level of service to passengers and airlines under privatization . With adoption of the green paper on fair and efficient pricing in 1995, the European Commission stated its view that airports are part of the general infrastructure that should be priced according to social marginal-cost principles.3 Member states such as Germany have also adopted these principles in their policy papers.4 Therefore a key objective for airport policy is efficient provision of airport services. Second, there has been a shift to considering regulation or semiregulatory processes that differ from either state ownership or rate-of-return regulation as an alternative means of governance for the airport system. Academic circles, for example, have engaged in substantial debate about the comparative merits of types of regulation—pricecap versus cost-based regulation with single- versus dual-till systems—as well as whether there needs to be any formal regulation at all. This view of relaxed or minimal regulation has been taken up by airports that depict themselves as an industry facing significant competitive pressures.Airlines in contrast criticize airports for not having achieved the cost efficiencies of the carriers. Airlines tend to see airports as natural monopolies that are not regulated effectively under current rules. We begin with an overview of the EU airport industry and the changes in traffic over time.We also discuss legislation that affects airports,take note of the number and features of airports in member states, and briefly discuss airport privatization,which leads naturally into the topic of airport regulation.Our purpose is simply to point out what has been happening in aviation in the EU and to discuss those factors that have hindered greater privatization of EU airports. This discussion leads to an examination of the evolution of airport regulation and the distribution of differing types of regulation across member states.In this section differences in single- and dual-till price regulation are assessed.The second major topic of the paper—the evolution of slot allocation—is examined next,along with the methods of allocation. In the summary section,we take up The European Union 37 including an important policy directive by the EU on introducing policies that focus on improving economic efficiency and competition.While these...

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