Compensatory Airline Agreement

The objectives of this research project are to: (1) document cases where U.S. airports are moving from a residual methodology to a compensatory or hybrid rate-setting method. (2) Taking into account the institutional framework within which airports operate, to assess the reasons and expected results of the different methods of setting fares. (3) examine the systematic differences between airports with different pricing methods in: (a) operating financial performance; (b) maximising the potential for turnover outside aeronautical aircraft; (c) operational efficiency. In the 33 years since the deregulation of the aviation industry, many airports have moved from the residual rate adjustment methodology to the compensatory or hybrid method. In the case of the residual method, all non-aeronautical revenues at the airport are charged to the costs and the balance is charged to the airlines (or, in the case of excess non-aeronautical revenues, a credit). Under the offsetting method, the airport sets the airlines` tariffs and charges on the basis of the percentage of costs corresponding to the use of the facilities by the airlines, without taking into account the amount of revenue. Excess revenue is usually withheld by the airport. Hybrid methods are generally compensatory for terminal facilities and residual methods for aerodromes.

However, there are many possible hybrid variants, including methods involving compensatory calculations, combined with a distribution of non-airline revenues with airlines. In addition, operating and leasing contracts concluded by airlines based on the residual method generally contain a MAJORITY OWNERSHIP PROVISION (MII) obliging the airport to obtain the agreement of a majority of airlines operating at the airport, the majority being defined on the basis of the share of the weight of the Angelalande or the aircraft or both, before continuing with capital expenditures. Under the offsetting method, airports have the option to withhold excess revenues out of airlines and have greater control over airports` investment decisions, but their financial situation is also more dependent on revenues off airlines and therefore more vulnerable to traffic fluctuations. . . .

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