UK regional airport commercialisation and privatisation: 25 years on

It has been 25 years since the UK was the first country to begin the process of commercialising and privatising its airports. The purpose of this paper is to revisit the UK Government’s stated aims with respect to commercialisation and privatisation, namely to “encourage enterprise and efficiency in the operation of major airports … [and that] … air transport facilities should not in general be subsidised by the taxpayer … [and they] should normally operate as commercial undertakings.” The authors of this paper consider the success of commercialisation and privatisation against these aims with respect to the 16 UK regional airports commercialised by the 1986 Airports Act part II. In addition, this paper considers the policy ramifications that have eventuated. The authors argue that many of the benefits may have been achievable by commercialisation alone.     

The evolution of airport ownership and governance

This presentation examines the evolution of airport governance from public utility to modern business. I also briefly look at airport regulation and in this context ask the questions, do airports need to be regulated and if so, why? I consider the new thinking on two-sided platforms and examine whether this may be the new way of thinking about governance. In judging governance structures and regulation, I argue that dynamic efficiency has been underemphasized in the debate over privatization and that airline deregulation has been most important in shifting the balance of power between airlines and airports.     

US airport ownership,efficiency, and heterogeneity

All US commercial airports are in the public sector yet not all have the same ownership type. For medium and large hub US airports we use stochastic frontier analysis to analyze the efficiency differences for alternative airport ownership types. We find that while form of ownership may matter for cost efficiency, in general its effect is relatively small. Yet type of public sector ownership does have cost efficiency implications in certain environments. Further, when heterogeneity is not controlled, the results change substantially so that type of ownership matters much more which demonstrates the importance of controlling for cross section heterogeneity.     

Changes in airport operating procedures and implications for airport strategies post-COVID-19

Covid-19 is demanding a lot of changes in the realm of our daily lives. The aviation industry is also facing unprecedented changes in the management environment. Financial tensions across the sector are rising. This study suggests that the airport strategy's direction focusing on commercial revenue management. After Covid-19, safety and hygiene will be the top priority. As a result, changes in airport operating procedures are inevitable. The most noticeable difference will be the strengthening of the verification process for passengers' health conditions. Dwell time increase can be the by-products. This study identifies a dwell time increase has a more significant impact on increasing the existing purchasers' spending than creating new buyers. Airport operators can introduce a service differentiation perspective, such as a dedicated service, to utilize the current buyers' dwell time more faithfully. Also, the rise of online channels requires airport operators to change sales strategies, reinforcing emotional promotion to stimulate impulse buyers' willingness-to-buy. Before Covid-19, there was little effort to reconcile operation policies and commercial revenue despite the growing importance of revenue management. However, now it is time to change. Pre-Covid-19, passengers were advised of using off-airport processes, such as online check-in and mobile boarding passes. Now, getting passengers to the airport quickly and securing their dwell time can be financially more beneficial. It is necessary to incorporate the commercial revenue perspective into operation policies post-Covid-19 actively. Our finding indicates that even a passenger with solid purchasing power may lose the purchasing intention when assigned to an unfavorable gate or terminal. Airport operators need a better understanding of passenger and flight characteristics when determining operation policy, such as gate allocation or membership services.     

Current and future noise impacts of the UK hub airport

Noise is a negative byproduct of aviation operations, the effects of which can have a significant impact on human health and welfare. In this study, we model the present day noise impacts from two London airports: Heathrow and Gatwick. We monetize perceivable and attributable impacts using a willingness to pay for abatement from hedonic pricing studies, and we monetize other health impacts by combining the value of life years lost from mortalities and a cost of illness approach. We find that noise generated by operations at these two airports impacts 255,800 people, contributing to 54 myocardial infarctions and 17 premature mortalities each year. We find annual total damages of £80.3 million and £0.87 million attributable to Heathrow and Gatwick respectively. Further, we calculate expected noise impacts in 2030. Due to capacity constraints and technology improvements, noise impacts are expected to decrease to £76.5 million per annum if neither airport undergoes expansion. However, if Heathrow expands through runway extension or construction of an additional runway, total damages increase £92.5 million or £104.6 million respectively. Expanding Gatwick with a second independent runway results in total annual damages of £78.8 million.     

UK airport employee car parking: The role of a charge?

Airports employ significant numbers of workers who favour using the private car for the journey to work because of the location of many facilities and the times they need to travel. At the same time official policies for congestion and environmental reasons seek to limit car use. This can pose parking problems for the airports. This note looks at some of the particular issues confronting UK airport management when trying to conform to official policies while at the same time meeting the needs of their workers and the role charging may play in the solution.     

Efficiency and patterns of service mix in airport companies: An input distance function approach

In this paper an input distance function approach is used to evaluate efficiency and technological characteristics of Italian airport companies for the period 2000–2005. This approach is robust to deviations from neoclassical paradigm in terms of cost-minimizing behavior. Duality relationship between the input distance function and the shadow cost function is exploited to derive cost complementarities among outputs. Empirical findings are used to discuss the economic implications connected to changes in airport organization, involving in particular outsourcing of handling operations and development of commercial activities.     

Total factor productivity analysis of the UK airport industry: A Hicks-Moorsteen index method

This study examines the total factor productivity (TFP) change of the UK airport industry from 2001 to 2009 using a Hicks-Moorsteen index method. The results show that the industry experienced an average annual growth in TFP of 0.32 per cent with efficiency change being the main contributor to the TFP growth. We find that private UK airports enjoy slightly higher TFP growth than those in public or mixed ownership. Regulation and airport size are found to have statistically significant effects on the airport productivity level.     

Queue behavioural patterns for passengers at airport terminals: A machine learning approach

Passengers go through different handling processes inside airport terminal buildings. The quality of these processes is usually measured by the time passengers require and by the level of comfort experienced by them. We present an analysis of behavioural patterns in queues at check-in desks and security controls, which are two of the most critical processes regarding passenger service. The passengers' flow is simulated to obtain queue lengths at one busy European airport between 2014 and 2016, supported by real flight data. Simulation is designed as a store-and forward cell-based system, whose parameters have been tuned and validated with real data from observations and empirical capacity and demand studies within the airport. Random Forest algorithms are then implemented to develop different models for each parameter prediction, after a data analysis stage based on statistical and visualization methods. Feature analysis techniques between dependent variables and the target outputs (queue lengths) determine which are the fundamental elements to explain queue behaviour and to predict target variables. We provide a method to forecast behavioural patterns at check-in desks and security controls, to help airport operators to implement adequate response policies. Queue behavioural patterns are captured by Machine Learning models, which can be used to offer improved passenger services (such as real-time predictions for expected waiting time at queues), or can be considered in a dynamic approach for terminal services design (as the entire progress of terminal handling depends on the stochastic behaviour of passengers). This could be a key tool for managing passengers demand and optimise the infrastructure's capacity through resource allocation.     

US airport financial reform and its implications for airport efficiency: An exploratory investigation

This study investigates the effect on airport productive efficiency of two major funding sources used by US airports, namely the Airport Improvement Program (AIP) grants and the Passenger Facility Charges (PFC). A two-stage Data Envelopment Analysis (DEA) modeling approach is employed for this purpose. In the first stage, we estimate airport productive efficiency using a variable returns-to-scale DEA model with both desirable and undesirable outputs. In the second stage, random effects regression models are estimated with airport efficiency scores from the first stage as the dependent variable and PFC and a proxy for AIP grants as two of the explanatory variables. By applying the two-stage DEA model to 42 primary US airports, it is found that PFC use has a positive impact on airport productive efficiency, whereas the impact of AIP grants is negative. Multiple counterfactual scenarios are examined by altering the mix of the two types of funding sources. The results show that simultaneously raising the PFC ceiling and decreasing AIP grants could lead to greater airport productive efficiency. The US federal aviation authority would also benefit from realizing these scenarios, especially given the budgetary constraints it faces.     

The geography of the Spanish airport system: spatial concentration and deconcentration patterns in seat capacity distribution, 2001-2008

This paper analyzes the geography of seat capacity at Spanish airports between 2001 and 2008. Concentration and deconcentration patterns for different markets have been identified. For this purpose, we use the Herfindahl-Hirschman Index (HHI), the Concentration Ratio (CR) and the Lorenz curve. From our analysis, we conclude that seat capacity follows a deconcentration pattern due to the growth of low-cost carriers at small- and medium-sized Spanish airports. This is in line with earlier studies for Europe as a whole. Intercontinental seat capacity still remains very much concentrated in Madrid and, to a lesser extent, in Barcelona. However, new strategies by long-haul airlines bypassing the primary European hubs foster the deconcentration of seat capacity in the Asian and North American markets. In the case of Spain, the recent liberalization of the EU-US market may become an important enabler of such network strategies, e.g., Delta has operated a route from Valencia to New York-JFK since 2009. In other intercontinental markets, capacity is more and more concentrated in Madrid. We highlight the restructuring of Iberia’s network as an important factor behind the increasing dominance of Madrid in intercontinental markets.     

Port and airport divestiture in Canada: a comparative analysis

Canada is embarked upon a policy of divesting many of its smaller ports and airports from federal control to local management. Despite a similar set of policy goals, airport transfers have proceeded generally faster than ports. By examining divestiture at several facilities in Quebec this paper demonstrates that local conditions and attitudes are important in explaining the differences in the implementation of two seemingly similar policies.     

Regional airport choice: Consumer behaviour and policy implications

The analysis of origin airports in multi-airport regions has a well established tradition in transportation and regional economics. The main goal of the paper is to estimate the importance of the different attributes that determine origin airport choice. In our case we adopt a stated preference approach to study this problem and evaluate the effects of possible policy interventions. We also perform a detailed segmentation of the sample studied according to the socio-economic variables that prove statistically relevant when interacted with the attributes used to characterise airport choice. Moreover, in order to test for the presence of heterogeneity in agents’ preferences we estimate several mixed logit models with different specifications, including heteroscedasticity and error component. With respect to previous studies we develop and extend the traditional SP approach by also analysing the role and relevance of attribute cut-offs in this research field. The policy simulations produced are based on the estimation of airport-specific attributes. The study concentrates on a multi-airport region in central Italy where four competing airports are located.     

Spain's airport infrastructure: adaptations to liberalization and privatization

This paper gives an overview of Spanish airports and their traffic and identifies Spain's infrastructure needs. The advantages and disadvantages of public and private management of airports in Spain are discussed. Moreover, key legislative reforms are suggested in anticipation of the structural and administrative changes needed to permit private investment in the development of Spain's airports. Investment proposals for the busiest Spanish airports are examined, including handling services. To conclude, global trends in the development of airport infrastructures are compared with those shaping the present and future growth of Spanish airports.     

Management style and airport performance in Brazil

The intention to privatize Brazilian public enterprises dates from 1990. As with other enterprises, a board was appointed at the Brazilian Airport Infrastructure Enterprise to prepare it for privatization. Although the enterprise remains public, there are clear signs of substantial changes in the airports it manages. This study uses data envelopment analysis techniques to investigate the impacts of changes in managerial style on airport performance between 1998 and 2001. Despite a decline in operational performance, financial performance improved.     

Accessibility modelling: predicting the impact of planned transport infrastructure on accessibility patterns in Edinburgh,UK

The achievement of good spatial accessibility and equity in the distribution of urban services is one of the supreme goals for urban planners. With Scottish Government backing, the City of Edinburgh Council (CEC) has started to construct a tram network to cater for the future needs of Scotland’s capital city by providing an integrated transport solution using trams and buses. Spatial Network Analysis of Public Transport Accessibility (SNAPTA) which is a GIS-based accessibility model has been developed to measure the accessibility by public transport to different urban services and activities. The model responds to several limitations in other existing accessibility models in planning practice. It offers an alternative and practical tool to help planners and decision makers in examining the strengths and weaknesses of land use – transport integration. SNAPTA has been applied to a pilot study in Edinburgh city to identify the contribution of the infrastructure improvements of the tram system and Edinburgh South Suburban Railway (ESSR) to improved accessibility by public transport to six types of activity opportunities. This paper outlines the concept and methodology of the SNAPTA model, and presents the findings related to this pilot study with a focus on changes in potential accessibility to jobs between four different public transport network scenarios. The accessibility values so obtained help to identify the gaps in the coverage of the public transport network and the efficiency in the spatial distribution of urban services and activities. The findings focus on whether the planned transport infrastructures for Edinburgh will lead to better accessibility and reduced inequity (in terms of accessibility) across the city.     

Pro-competition rules in airport privatization: International experience and the Brazilian case

This article aims to demonstrate the importance of establishing pro-competition rules in the concession of multiple airports to private companies by describing the recent Brazilian experience. More specifically, it addresses: (i) how the economic literature deals with potential competition among different airports, and how this competition was dealt with in the concession programs of Australia, Mexico and the United Kingdom; and (ii) Brazil's recent experience with airport concessions, where international benchmarking led to cross-ownership restrictions. As a conclusion, this paper defends that governments should design regulatory restrictions that account for the existence of competition among airports. Nevertheless, these restrictions must be carefully planned and designed to achieve their goals.     

The Italian airport industry in transition: a performance analysis

This paper analyzes the impacts of Italian government actions on the efficiency of 36 airports between 2001 and 2003. The changes have included privatization, enlargement of the services provided directly by airport management companies, through the modification of the concession agreements, and the creation of two hubs. The analysis, using the consolidated two-stage data envelopment analysis with bootstrapping, indicates that airports with a majority public holding are on average more efficient and the presence of two hubs is source of inefficiency.     

Airport ownership and financial performance: Evidence from Italy

In the past few decades many countries have increased the presence of various forms of private sector involvement in airport ownership and management. This paper focuses on the financial performance of Italian airport companies. We present empirical evidence separately for two groups where public or private management majority prevails. The main findings indicate that companies with a private majority outperform the others in terms of financial indicators that are related to operating income.