Framework for Airport Charges Regulation in Ireland

A systematic approach was necessary to help fulfill their regulatory mandate and ensure that airports were able to improve service without burdening their stakeholders.

Setting fair rates and charges requires transparent regulation
IMG Rebel was hired as the lead advisor to Ireland’s Commission for Aviation Regulation (CAR) to assist in its regulation of key airport and terminal service charges at Ireland’s major three airports: Dublin, Shannon, and Cork.

To undertake this task we developed a large-scale financial model for all three of the airports and the corporate entity that operated them. The model was used to determine an appropriate rate structure for airport services that demonstrated the resulting profitability of the airport owners and operators. IMG Rebel’s analysis incorporated detailed data of historical costs, future capital expenditures, financing assumptions, and rates of return. IMG also reviewed the proposed expansion plan for all three airports and carried out a demand capacity analysis using its own air traffic demand forecast and forecasts developed by Aer Rianta, the airport operator.

Different approaches to regulation
IMG Rebel assisted CAR in developing the regulatory instruments, systems, and structures to satisfy its mandate. We did this by first examining and comparing different approaches to airport regulation that were being used in various countries around the world. Benchmarking studies were used to compare the overall operations and financial status of the three main Irish airports with over 20 other airports in Europe and the U.S.

The result was a regulatory structure that incorporated financial, operational, and investment performance benchmarks and measurements to monitor and incentivize performance and establish fair charges that recover the government’s investments while ensuring a reasonable return.

We then assisted CAR in successfully defending its regulatory and valuation approach in the Irish court system. This new regulatory structure improved performance and ultimately realized over $1 billion in capital expenditure savings.