Issues in Airport Runway Capacity Charging and Allocation

Optimal economic charging for transportation infrastructure requires the meeting of numerous conditions to achieve first-best traffic flows. In practice, these types of assumption are not met, and first-best pricing is seldom tenable. Second-best approaches pose particular problems for atomistic markets, such as cars seeking road space, although the challenges are different when there are a limited number of buyers and queuing abilities are constrained. This paper considers this latter situation in the context of air transportation infrastructure. It looks at some of the empirical work on airport runway pricing to assess whether it adequately reflects the nature of the situation. It considers the role that more direct, market-oriented approaches may play in enhancing the efficiency of infrastructure allocation once one moves away from the atomistic market that dominates thinking regarding road transportation. In doing so it pays particular attention to the technical differences of the industries involved. © 2008 LSE and the University of Bath