expertise
Airport charges
charge
Calculation & review
Airports provide services and facilities to airlines. The tariffs they are allowed to charge for these are regulated to prevent an abuse of market power. Governments or independent regulators assess whether the charges proposed by airports comply with the applicable regulation. Regulations vary from country to country, but are often based on the same principles. This means that the charges should be related to the costs incurred. In addition, airports are allowed to charge a return on capital invested.
Beelining advises airports on the level of their charges. Beelining also reviews charge proposals of airports on behalf of regulators and airlines.
What are reasonable airport charges based on the costs, invested capital and risk profile of an airport?
assessing charges
Methodology
Assessing reasonable airport charges requires a number of steps:
- Forecasting traffic developments in the upcoming tariff period;
- Forecasting airport costs and the value of its assets in the upcoming tariff period, taking into account necessary investments and depreciation;
- Determining what part of the costs and assets may be allocated to the tariffs based on the applicable regulations;
- Determining the return on invested capital or Weighted Average Cost of Capital (WACC);
- Determining whether too much or too little was charged in the current tariff period and calculate the part that needs to be settled in the upcoming period;
- Allocating costs and returns over invested capital to the various passenger and aircraft-related tariffs;
- Determining the passenger- and aircraft-related tariffs for the upcoming period.
return on invested capital
The WACC
The return on invested capital that airports may incorporate into their charges is often subject to debate. The return should be equal to the return investors could have earned by investing in debt and equity of companies with a similar risk profile. The return is therefore determined on the basis of the Weighted Average Cost of Capital (WACC).
The WACC depends on the ratio of debt to equity (the so-called gearing), the corporate tax rate, the risk-free interest rate and the risk premiums for debt and equity.
The risk premium for equity is determined using the return on equity adjusted for the risk of the specific company. For listed airports, this risk is equal to the equity beta of the company. For unlisted airports, the equity beta is based on the betas of listed airports.
Beelining has developed a method to efficiently determine the WACC of an airport. The method uses public input data, which makes it objective and reducible.
for airports, airlines and regulators
applications
Beelining advises airports on the level of their airport charges and reviews charge proposals on behalf of regulators and airlines.
Advising
Beelining advises airports on the level of their future charges based on expected traffic and transport developments and planned investments, taking into account the applicable tariff regulation.
Reviewing
Beelining reviews charge proposals of airports for regulators and airlines. Based on a shadow calculation, it assesses whether the proposed charges are reasonable and comply with the applicable tariff regulation.
questions about this expertise?
Contact
If you have any questions about this expertise or about our services, please feel free to contact us by e-mail or via the contact form.
Contact details
info@beelining.nl
+31 (0)6 2823 7401
www.beelining.nl
KvK: 83803157
BTW: NL003875598 B18
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areas of expertise
Beelining specialises in modelling aviation emissions, conducting socio-economic impact studies, setting and evaluating airport charges and preparing traffic forecasts. For more information on these areas of expertise, click on the buttons below.