European Airport Reform: Slots and the Implicit Contract Between Airlines and Airports

Abstract

Europe faces some of the most difficult airport environments in the world. Many airports are very busy, are difficult to expand, and several have high charges. In spite of this, in some ways, such as the allocation of scarce capacity without major delays, they perform quite well. This paper examines the interests of the main stakeholders, such airlines, passengers, airports, and governments in these reforms, and the ways key institutions impact on them. A key institution is runway slots—these resolve the delay problem quite effectively. However, they do create large rents which can be used to enable poor efficiency, and enable the airlines and airports to create implicit contracts to underinvest.