Regulation of air traffic control services

This chapter focuses on the regulation of Air Traffic Control (ATC): how it is done, and how it can be improved. The analysis is general, but it pays specific attention to Europe, which is a region which is dominated by public but regulated suppliers. Major parts of ATC systems, especially the en-route systems, are characterised by natural monopoly. Worldwide, most ATC systems are publicly owned and operated, though there are significant exceptions, such as those of the United Kingdom and Canada. In the EU ATC systems are government owned, though many are corporatised. With ATC systems there is a short run problem of achieving productivity, and in some cases, there are also quality problems, which are manifested in delays. In the long run there are problems of achieving efficient levels of investment. In the EU there is strong evidence of productive inefficiency in many countries’ systems, and pricing often involves traffic risk sharing mechanisms, which dampen incentives for efficiency. Questionable incentives for efficiency in government owned systems are an issue. Turning to the long run, in Europe there have been chronic problems of achieving adequate investment, made more complex by the difficulties in achieving interoperability between the systems of different countries. The EU system of regulation is such that incumbent operators are shielded from risks (very evident in the Covid crisis), leading to weak incentives for efficiency.