Zurich Airport News Flash No. 19 / Economic Regulation of Airport Charges - Consultation Process initiated by Federal Office of Civil Aviation
The Federal Office of Civil Aviation (FOCA) has initiated the consultation process for the revised Economic Regulation of Airport Charges in Switzerland. Based on the Swiss Aeronautical Law (Luftfahrtgesetz) Article 39, FOCA worked out an ordinance for the handling of charges for Swiss airports, including Zurich Airport.
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In 2009, the European Union issued a directive (EG 2009/12) on airport charges. Based on the bilateral contracts of Switzerland with the European Union, the Federal Office of Civil Aviation (FOCA) concurrently initiated a revision of the Swiss Aeronautical Law (Luftfahrtgesetz). This revision was approved by the Swiss Parliament in autumn of 2010. Article 39 of the revised Swiss Aeronautical Law stipulates that the Federal Government has to specify certain elements pertaining to airport charges in an ordinance. FOCA now initiated the formal consultation process for said ordinance.
Timeline of proposed ordinance
On November 9, 2011, FOCA will host a hearing with industry representatives on its proposed ordinance. Comments may be submitted to FOCA during and after the hearing (until December 9, 2011). After this consultation period, the adoption process will continue within the public administration. The final approval will be given by the Federal Council. The proposed ordinance calls for a transition period for the implementation of the ordinance by the Swiss national airports Zurich and Geneva by the latest in November 2013 respectively for certain elements in April 2015.
Content of proposed ordinance (draft for consultation)
In our understanding, FOCA proposes an ordinance with the following step by step approach on future airport charges setting.
1. The first step intends that airports and its users reach a mutual agreement on the system and level of the charges for a certain period. The time allotted for this first step is four months, with FOCA taking the role of an observer.
2. In case no mutual agreement can be achieved within mentioned timeframe, the airport operator has the option to apply to FOCA to set airport charges based on a benchmark study with peer airports.
• If FOCA approves that a benchmark study shall form the base for setting airport charges, the airport operator must subsequently submit a charges proposal to FOCA. Based on a comprehensive benchmark study led by FOCA, FOCA will decide on the airports charges proposal within 60 days.
• If FOCA rejects the proposed application based on a benchmark study, step three (see below), the so called “Fall Back Regulation”, will apply.
3. In case airport charges can neither be defined by mutual agreement (step 1) nor the option of setting them based on a benchmark study (step 2) has been approved, the so called “Fall Back Regulation” will be adopted. The Fall Back Regulation is specified in the proposed ordinance. In our understanding, this Fall Back Regulation essentially consists of:
• A cost-plus regulation based on two tills (regulated/ non-regulated), wherein the airport operator is allowed to recover its full costs on the regulated asset base, including its costs of capital, which are determined based on economical principles.
• Following industry standards, the regulated asset base of the proposed ordinance contains the air traffic segment, centralised infrastructures such as baggage sorting systems and energy power supply as well as access infrastructure to the airside of the airport. Non industry conform is, that the draft ordinance for consultation also foresees to include a substantial part of car parking assets into the regulated asset base.
• A hybrid element: The Fall Back Regulation stipulates that the airport must take into consideration the economic profit (operating profit less costs of capital) of its airside non-aeronautical business when defining airport charges. To what extent economic profits of the airside non-aeronautical businesses have to be taken into account depends on a return on capital benchmark with similar non-aeronautical businesses. In any case, the ordinance foresees to take into account 20 percent of the economic profit as a minimum.
Initial analysis of Flughafen Zürich AG on the proposed ordinance
After a first analysis of the proposed ordinance, Flughafen Zürich AG has reached the following preliminary conclusion:
• Flughafen Zürich AG welcomes the primary objective of FOCA to reach an agreement between airports and users.
• If no agreement can be reached, Flughafen Zürich AG would analyse in due course whether to propose to FOCA to enter in a benchmark study or whether to apply the Fall Back Regulation directly.
• The proposed ordinance is to a certain extent based on economical principles. Economic principles are absolutely crucial for all stakeholders to ensure also in the future a high quality, safe and efficient operation of Zurich Airport.
• Flughafen Zürich AG will clearly oppose the inclusion of a substantial part of car parking assets in the regulated asset base. In addition, Flughafen Zürich AG is against the proposition that non-aeronautical economic profits shall subsidy the airport charges. Flughafen Zürich AG strongly believes that both elements are unnecessary and counterproductive.
• Flughafen Zürich will further analyse in depth the proposed ordinance and submit commentaries to FOCA.
The FOCA webpage (http://www.bazl.admin.ch/fachleute/01277/index.html?lang=de) specifies on how and up to which date it will consider comments.