The Paper challenges the common supposition that (scarcity) rents at Heathrow airport accrue from airlines charging efficient clearing prices and instead suggests that because of oligopolistic practices, much of the rent at Heathrow is quasi-monopoly rent. It also suggests remedies that could be implemented in the short term before more runway capacity is added and that if Heathrow airlines matched the average load-factors of those at London’s other major airport, Gatwick, average fares might be as much as 5 per cent lower.
The CAA has asked us to consider the CC’s draft paper on the Assessment of Competition at Stansted Airport, which differs from the CAA’s own initial thinking to an extent that appears to lie well beyond a normal level of disagreement that might occur when two, independent authorities address a complex factual situation.
2. In what follows we seek to identify and understand the sources of these major differences, with a view to facilitating development of the most appropriate approach to regulation in the specific factual context of Stansted airport.
Comment on Competition Comission report: Stansted Quinquennial review – Assessment of Competition at Stansted Airport
We have been asked by the Civil Aviation Authority to comment on the Competition Commission (CC)`s paper on Assessment of Competition at Stansted Airport (ACP) and on a paper by Dr David Starkie and Professor George Yarrow in response to the CC`s paper. Our comments are on the general approach taken by the CC and by Starkie and Yarrow.