Small and regional airports frequently suffer from limited traffic given minimum fixed infrastructure requirements and insufficient revenues to cover their costs. The question is whether such airports could be structured, managed and possibly financially supported in order to survive efficiently. Efficient operations contribute to decreasing the financial dependency of airports on subsidies or the likelihood of foreclosure. This paper applies data envelopment analysis, assuming that the aeronautical output is exogenous, in order to estimate the relative efficiencies of a set of 85 European regional airports over the last decade. We estimate the potential savings and revenue opportunities to be in the order of 50% and 25% respectively because cost increases were in excess of any changes in demand over the timeframe. Using second stage regressions we examine the reasons for poor performance, which include discretionary variables such as the failure to search for commercial opportunities or to produce ground-handling and fueling activities in-house. We also note that belonging to an airport system reduces efficiency in the order of 5%. Finally, the break-even passenger throughput over the last decade more than doubled to 464 thousand, however airports behaving efficiently could have covered their annual operating budget with a mere 166 thousand passengers annually.
Bibliographical noteFunding Information:
We are grateful to the German Airport Performance (GAP) Research Project, the German Aviation Benchmarking (GAB) Research Project funded by the German Federal Ministry of Education and Research and the Norwegian Ministry of Transport and Communications for providing data and financial support. We would like to thank Mr. Per Kolstad and Profs. Hans-Martin Niemeier, Juergen Mueller and Frode Steen for valuable discussions that enabled greater insight into the workings of airport systems. We are grateful to Roman Pashkin, Mikhail Zolotko, Branko Bubalo and Eric Njoya for excellent data collection. We would also like to thank the participants of DEA 2012, EURO 2012, INFORMS 2012 and the Sorbonne for useful comments. Nicole would also like to acknowledge the Recanati Fund for partial financial support of all her research.
- Air transport
- Data envelopment analysis
- Regional policy