What approach is taken in a Hybrid rate setting model?

In a Hybrid rate setting model, a combination of residual and compensatory models is employed to determine how airport costs are allocated among different users, primarily airlines.

In a residual model, airlines pay rates that cover an airport’s costs, including those costs that exceed revenues generated from non-airline sources. This means the airlines bear the risk of any shortfall, as they are essentially guaranteeing airport funding. Conversely, the compensatory model allows airlines to pay for a portion of the airport’s costs based on negotiated agreements and actual usage without necessarily covering all costs.

The hybrid approach blends these two methodologies, thus allowing for a balanced means of cost allocation. It provides flexibility in addressing various financial conditions and shifts some risks back to the airport operators while still ensuring that airlines contribute fairly based on their use of the facilities. This model reflects the complex financial realities of modern airports, where revenues from both airline and non-airline sources are considered.

The other options pertain to scenarios that do not capture the essence of the hybrid model's strategy in balancing cost-sharing and risk allocation among various stakeholders in airport operations.