Evolution of pricing structures at German Airports and the role of ZI Plamena Ivanova

1. Evolution of pricing structures at German Airports and the role of ZI Plamena Ivanova Berlin, April 10 2008

2. What is meant by aviation charges? • Airports charge the airlines for conducting their aviation business. They are an important source of revenue and therefore of a major interested to all airport stakeholders. • 2. Regulated vs. Non-regulated charges in Germany • §43 LuftVZO - Air Traffic Licensing Regulations • § 6 BADV - German Ground Handling Directive 3. Has the structure of charges changed over the last years?

3. 4. Central Infrastructure charges • Airside central infrastructure charges • Landside central infrastructure charges baggage handling/ inbound baggage handling/ outbound passenger bridge stationary 400 Hz power supply storage container toilets disposal fresh water supply using of the check-in-counter

4. Charges – the airprots‘ marketing tool 5. The presence of LCC and the changing structure of airports Ex. Berlin Schönefeld – strategy – attract LCC Ex. Köln-Bonn – after the move of political assets to Berlin, the airport has had to make decision how to use its capacity – go ahead with LCC Airports fighting for clients LCC seeks low airport fees

5. More variability among charges‘ structure in 07? Is this related to the emergence of LCC?

6. 2007 Share of §43 – Charges 2007

7. Structure of total charges (§43 +ZI) in 2007 (Source: Li 2008)

8. Measure of variability 1998-2007

9. The new approach at Düsseldorf • What is the airport in Düsseldorf doing since 01.01.2008? • Replacement of ZI-Charges and integrating them in the §43 – Charges • The new simplified structure of charges consists of: • Landing fees (per movement and MTOW) • Parking fee • Possitioning fee (only for using air bridges, per MTOW) • Passengers fee • The new charges scheme includes: • Introduction of volume rebates (passenger oriented) with a threshold value of 500.000 passengers. • Cap fee – ‚load factor‘ fee • EUR 5.50 per passenger if the load factor exceeds 80% for a calendar year

10. The new structure – moving toward more variability ZI - Charges §43 - Charges GFA Inbound and Outbound Charges Landing and Take-off Charges Passenger Charges Charges – air bridges & 400Hz supply Position Charges Parking Charges Volume Rebates ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges ZI - Charges §43 - Charges §43 - Charges §43 - Charges §43 - Charges §43 - Charges §43 - Charges §43 - Charges §43 - Charges §43 - Charges §43 - Charges §43 - Charges §43 - Charges §43 - Charges GFA Inbound and Outbound Charges GFA Inbound and Outbound Charges GFA Inbound and Outbound Charges GFA Inbound and Outbound Charges Landing and Taking off Charges Landing and Taking off Charges Landing and Taking off Charges Landing and Taking off Charges Landing and Taking off Charges Landing and Taking off Charges Landing and Taking off Charges Landing and Taking off Charges Landing and Taking off Charges Landing and Taking off Charges Landing and Taking off Charges Passengers charges Passengers charges Passengers charges Passengers charges Passengers charges Passengers charges Passengers charges Passengers charges Passengers charges Charges – air bridges & 400Hz supply Charges – air bridges & 400Hz supply Charges – air bridges & 400Hz supply Charges – air bridges & 400Hz supply Charges – air bridges & 400Hz supply Positioning charges Positioning charges Positioning charges Positioning charges Positioning charges Positioning charges Positioning charges Positioning charges Parking charges Parking charges Parking charges Parking charges Parking charges Parking charges Parking charges Volume rebates Volume rebates Volume rebates Volume rebates Volume rebates Volume rebates

11. Volume Rebates per PAX – Incentives for competition among the airlines Dec’06 – Nov’07: Passenger numbers Air Berlin 6.473.685 TUIfly 1.140.929 Lufthansa 4.419.008 Condor 788.805

12. The new structure – a tool to increase capacity use and decrease complexity in Düsseldorf • - to decrease complexity in charges setting • - to increase the variability of costs • - the rebates are in favour of the ‚big‘ clients • - small aircraft are paying more • - overall effect is price increase of 1%

13. The new structure – a tool to increase capacity use and decrease complexity in Düsseldorf • Background : • - the main airport in the third most densely populated area • - airside capacity is especially restricted • - a large percent of small aircrafts is present • - introduced a promotion program in 2008 • Above-average or better than last year‘s capacity use • Passenger volumes are expanded , as they include more intercontinental connections originating in Düsseldorf

14. Ongoing research • What are the advantages and disadvantages of the new approach? • Can we learn more from the experience of Düsseldorf? • Will this strategy be beneficial and successful?

15. Thank you for your attention! GERMAN AIRPORT PERFORMANCE A Joint Project of: Berlin School of Economics (FHW) University of Applied Sciences Bremen Int. University of Applied Sciences Bad Honnef