In the context of the European Commission’s ‘Fitness Check’ review of the EU aviation market legislative framework, ACI EUROPE commissioned Oxera to examine the key drivers of airfares in Europe to understand the extent to which consumer outcomes are being affected by the current Regulations and the potential implications for the Commission’s review.

This study is based on Oxera’s novel dataset covering prices for scheduled flights from 54 European airports handling more than 5m seats per annum across the EEA, the UK and Switzerland between 2023 and 2025. The analysis considers four main drivers of airfares that are directly affected by the Slot Regulation and the Airport Charges Directive to help determine which factors have more influence on fares.

The study focuses on the following four drivers:

1. flight timing, capturing demand-side effects;
2. airport congestion, representing capacity constraints and scarcity rents;
3. airline concentration, capturing the effect of airline competition;
4. airport charges, representing a direct input cost faced by airlines.

Key takeaways from the study

The key findings from our report are:

• Airline competition is the driver in the scope of our analysis with the greatest impact on fares. Our analysis indicates that a 10% increase in market concentration is associated with a 1.06% increase in fares.
• Airline route entry is associated with a 6.7% reduction in fares, while exit is associated with a 9.7% increase in fares.
• Congestion also has a significant impact on fares. Our analysis indicates that a 10% increase in congestion is associated with a 0.93% increase in fares.
• Airport charges have a small and uncertain impact on fares. A 10% increase in airport charges is associated with a 0.35% increase in fares, implying a pass-through rate of 26%.

We have estimated that passengers currently pay a €6.4bn premium for congestion and a €1.7bn premium for concentration at the European airports within the scope of the analysis. This corresponds to an average airfare premium of €13.54 per one-way ticket at congested airports and an average airfare premium of €5.99 for concentrated airports.

Implications for the Fitness Check: policymakers have an opportunity to generate substantial benefits for passengers

The results from this study point to clear opportunities to generate significant savings and positive outcomes for passengers, our key findings are:

• Stimulating airline competition and slot use through an update to the Slot Regulation could lead to lower prices and more choice for passengers, as well as better use of existing infrastructure by airlines.
• Managing congestion in the short term and investing in capacity in the longer term will lower prices by reducing scarcity rents on fares at congested airports. This will also allow for more airline competition, increased connectivity and better quality of service through improved on-time performance and resilience at European airports.
• In an environment with increasing airline concentration and pressure on infrastructure, the benefits to consumers of airport investment are likely to outweigh their costs as higher airport charges are only partially passed through to passengers.