The impact of airport capacity constraints on air fares

Economic theory predicts that air fares at congested airports will be higher when airport capacity is insufficient to accommodate all passenger demand, as that excess passenger demand allows airlines to increase their air fares. Using econometric analysis of 65.000 air fares on a representative sample of city pair markets to/from European airports, SEO and Cranfield University have isolated the impact of airport capacity constraints on air fares, in a study commissioned by ACI EUROPE. The study finds that higher levels of capacity utilization are indeed associated with higher air fares, controlling for other factors that influence air fares. We estimate the total additional fare premium at congested European airports at 2.1 billion euro today. Airport capacity shortages in Europe are becoming increasingly severe. Based on EUROCONTROL’s ‘Challenges of Growth’ forecasts, the total fare premium levied by airlines at congested airports is projected to reach 6.3 billion euro by 2035.