Productivity Analysis of Public and Private Airports: A Causal Investigation

Around the world, airports are being viewed as enterprises, rather than public services, which are expected to be managed efficiently and provide passengers with courteous customer services. Governments are, increasingly, turning to the private sectors for their efficiency in managing the operation, financing, and development, as well as providing security for airports. Operational and financial performance evaluation has become increasingly important to airport operators due to recent trends in airport privatization. Assessing performance allows the airport operators to plan for human resources and capital investment as efficiently as possible. Productivity measurements may be used as comparisons and guidelines in strategic planning, in the internal analysis of operational efficiency and effectiveness, and in assessing the competitive position of an airport in transportation industry. The primary purpose of this paper is to investigate the operational and financial efficiencies of 22 major airports in the United States and Europe. These airports are divided into three groups based on private ownership (7 British Airport Authority airports), public ownership (8 major United States airports), and a mix of private and public ownership (7 major European Union airports. The detail ownership structures of these airports are presented in Appendix A. Total factor productivity (TFP) model was utilized to measure airport performance in terms of financial and operational efficiencies and to develop a benchmarking tool to identify the areas of strength and weakness. A regression model was then employed to measure the relationship between TFP and ownership structure. Finally a Granger causality test was performed to determine whether ownership structure is a Granger cause of TFP. The results of the analysis presented in this paper demonstrate that there is not a significant relationship between airport TFP and ownership structure. Airport productivity and efficiency is, however dependent upon the level of competition, choice of the market, and regulatory control.