Key points and issues

Air navigation services (ANS) is a crucial aviation infrastructure industry. Like most such industries, it has properties of a natural monopoly, making it a good candidate for economic regulation. However, there are additional factors that make air navigation, perhaps, a more complicated and less efficient industry than it needs to be. Some institutional changes aimed at bringing in market discipline and hopefully to increase the industry's efficiency are slowly taking place. Also, ANS is perhaps an aviation sector with significant potential for the commercial introduction of a radically new technology, which can substantially increase effective capacity of the aviation system. However, introduction of new technologies and institutional changes to the air navigation service providers (ANSPs) often clash with interests of unionized labour in the industry. This problem is especially acute in some European countries, for example, in 2016 alone French air traffic controllers went on strike at least 14 times.

We can delineate three distinct segments in the ANS industry, which correspond to different stages of the flight. These are “en route control”, “approach control” and “terminal” (also known as “aerodrome control”) services. These services are provided by air traffic centres, approach control centres, and control towers, respectively (at the majority of airports, both approach and terminal control services are provided from the control towers). While all segments of this industry have characteristics of natural monopolies, some limited competition for the right to operate these services has been introduced in a few countries in the terminal control segment (tower services). Here providers can bid for contracts to provide air navigation services at the airports’ towers, with the hope that the most efficient firm will get the contract by being able to bid lower prices than its competitors. Of course, services provided must meet the set safety standards, but this problem is typically addressed by having an independent safety regulator, responsible for certification of air traffic controllers and providers.

We can examine a number of key policy issues in the ANS sector. First is the issue of the optimal size of service providers – especially relevant for en route and approach control services.