What are airports?

This may seem a silly question, but only at first glance. Most people think about airports as the place where their flight begins and ends, something similar to but a bit more complex than train stations or bus terminals. Airports do occupy a prominent place in the modern world: they put cities on the map, define communities (think about Atlanta without a Delta hub), are a source of fascination (next time you are near an airport, observe people just spending time watching the airplanes take off and land), pride, and sometimes frustration (as discussed in chapters on congestion, delays, air and noise pollution). But what are they for an economist?

From the point of view of economics, the key question with respect to airports is whether they are infrastructure objects or firms. As a matter of fact, this question is answered differently in different parts of the world, as far as the aeronautical side of the airports’ operations is concerned. In the United States, airports are indeed considered simply a vital part of the aviation infrastructure. Private sector participation in airport infrastructure is therefore limited, airports are owned and managed by local authorities, and they are not allowed to make a profit on their aeronautical operations and discriminate in their pricing among aeronautical users. In contrast to this, many airports in Europe and Australia are fully or partly privatized. A significant number of airports in Europe, and all airports in Australia are allowed to set their aeronautical charges as they see fit. In the UK, for example, only Heathrow's and Gatwick's aeronautical charges are currently subject to regulation. In Australia, airports’ charges are not regulated, but are subject to monitoring under the threat of re-regulation in case airports are found to be taking advantage of their market position.

Airports’ revenue comes from both aeronautical and non-aeronautical activities. Aeronautical revenue comes from airlines and other users of the respective infrastructure (such as general aviation) in the form of take-off and landing charges. Those charges themselves normally include weight-based and passenger-based components.