State aid to low-cost airlines

An airport infrastructure manager can reasonably support an low-cost carriers (LCC) on a sustainable basis by using reductions to aeronautical charges. The contract between the airline carrier and the airport infrastructure manager does not unite two actors with equal negotiating power. The LCC can obtain significantly reduced aeronautical charges, which may raise concerns of distorted competition between carriers and of collectively suboptimal tax competition phenomena. The difficulty originates primarily from the fact that secondary airports experience issues with overcapacity and that opportunities for LCCs to trade off between various destinations place them in a monopsonistic situation. The aeronautical charge is proportional to this demand by calculation principle. Responsive to the amount from the aeronautical charges requested because it represents a direct cost, the airline carrier can use its market power to reduce charges, in turn increasing its profit without modifying constraints.