Airline competition and airport congestion have a greater influence on air fares than airport charges, according to a study by economic consultancy Oxera, commissioned by Brussels-based airport trade association ACI EUROPE.
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The report, Drivers of Airfares and Impacts on Consumer Outcomes, examines more than 62,000 data points across nearly 6,000 European air routes. The study is timed to inform the European Commission's review of the Airport Charges Directive and Airport Slots Regulation. Slot allocation rules are also under discussion in the UK.
The analysis covers scheduled flights from 54 European airports handling more than five million seats a year across the European Economic Area, the UK and Switzerland. It uses data covering 2023 to 2025 to assess four factors affecting fares: flight timing, airport congestion, airline market concentration and airport charges.
Oxera found that a 10% increase in airport charges was associated with a 0.35% increase in air fares. A comparable increase in airport congestion was associated with a 0.93% rise, while a 10% increase in airline market concentration was associated with a 1.06% increase.
The study estimates that around 26% of changes in airport charges are passed through to passengers, although it describes the impact of charges on fares as small and uncertain.
The presence of competing airlines was associated with lower fares. The entry of a new carrier on a route was linked to a 6.7% reduction in fares, while an airline's withdrawal was associated with a 9.7% increase.
Oxera also estimates that congestion creates an annual fare premium of €6.4bn across the airports covered by its analysis, equivalent to an average of €13.54 per one-way ticket at congested airports. A further €1.7bn in estimated fare premiums is attributed to airline market concentration, averaging €5.99 per one-way ticket at airports with concentrated airline markets.
ACI EUROPE has called for changes to slot allocation rules to make it easier for new airlines to enter markets, improve the use of existing airport capacity and increase transparency. It also wants airports to have a greater role in decisions about how slots are allocated, taking account of local connectivity needs.