One of the principal functions of the Commission is to regulate the level of revenues that the Dublin Airport Authority may collect in airport charges levied on users at Dublin airport.
What are Airport Charges?
For regulatory purposes, airport charges are
- Runway landing and take-off charges
- Aircraft parking charges
- Charges for the use of an air bridge
- Passenger processing charges
Airlines that include a breakdown of the taxes and charges sometimes include an item for airport charges. Interested parties will need to check with the airlines to establish exactly what charges are captured by this item; it may not accord with the definition of airport charges that the Commission regulates.
How are Airport Charges Regulated?
When setting the price cap the Commission has three statutory objectives:
- the efficient and economic development of Dublin Airport
- the ability of the Dublin Airport Authority to operate in a financially viable manner
- the protection of the interests of users and potential users of the airport
The Commission also has to have regard to a number of statutory factors.
To date the Commission has chosen to employ price-cap regulation, applied to a single till. Price-cap regulation is a form of incentive regulation. The Commission announces in advance a cap on the total revenues per passenger that the DAA may collect. This cap lasts for a period of four or more years. If the DAA can successfully reduce its costs below the level of the cap, the airport operator keeps the value of these savings until the cap is reset. At the time of the next price cap, the Commission will consider the level of costs that the airport operator was able to realise when setting the next price cap. Consequently the airport operator and users share the benefits of any cost savings that the DAA is able to realise. The incentives for the airport operator to realise costs savings ultimately should benefit users as well as the airport.
The price cap is derived from a series of inputs known as ‘regulatory building blocks’ which are calculated by the Commission at the time of a price cap determination. These building blocks are
- The regulatory asset base (“the RAB”) which in any given year is the sum of existing capital stock and a forecast of efficiently incurred new capital stock
- A return on an efficient capital stock
- Plus a depreciation charge on that capital stock
- Plus an estimate of efficiently incurred future operating expenditures
- Less an estimate of future commercial revenues
The sum of these building blocks is divided by a forecast of passengers (also a building block) to give the maximum per passenger airport charge.
What is the Current Cap on Airport Charges?
The level of airport charges are set with reference to the cost building blocks as described above. The Commission's determination on the maximum level of airport charges at Dublin Airport for 2010-2014 was set in December 2009 and varied in July 2010 following a referral by the 2010 Aviation Appeal Panel. The 2010 price cap at Dublin Airport is subject to the date at which T2 becomes operationally ready, which is currently expected by the DAA to be from 1 November 2010:
- The price cap in 2010 will be €9.03 per passenger if Terminal 2 is not operationally ready in 2010
- The price cap will be €9.42 if Terminal 2 is operationally ready from 1 November 2010.
The Commission's Decision of 30 July 2010 following the Referral by the 2010 Aviation Appeal Panel sets out how the 2010 price-cap is calculated if Terminal 2 becomes operationally ready at a date other than 1 November 2010 (see Annex 1:Revised Price Cap).
The maximum revenue per passenger that can be collected by the DAA at Dublin airport in 2010 is also subject to the DAA achieving certain quality of service targets during 2010. Further information on these quality of service targets, and how meeting or not meeting the targets can impact on the price cap, can be found in the Commission's final determination paper, published on 4 December 2009.
The Commission checks that the DAA has complied with the price cap annually and publishes a compliance report each year. This report is also an opportunity for the Commission to indicate what the price cap in current prices will be for the forthcoming year.