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Efficiency of Delhi International Airport Using Data Envelopment

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  • Somesh Kumar Mathur

    (Jamia Millia Islamia Central University ,New Delhi)

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    Abstract

    We work out the efficiency index of the Delhi Airport using monthly data(March 2000 through July 2004) of international and total traffic of aircraft's, passengers & cargo movements . The study compares the Delhi Airport technical efficiency index with the efficiency indexes of some selected domestic airports of India in 2000-01.The study uses data envelopment analysis for working out the technical efficiency using data on aircraft movements(output of the airport) and passenger movements and cargo traffic( both inputs to aircraft movements) .The airport production frontier at each point in time is constructed using deterministic, nonparametric (mathematical programming) methods (essentially, finding the smallest convex cone enveloping the data) and efficiency is measured as the (output-based) distance from the frontier. We find technical efficiency scores are higher based on time series evidence while they are quite low if we use cross sectional evidence of some selected domestic airports.The latter evidence favors privatization of the Delhi Airport. We study the impact of foreign direct investment/index of production, reserves/index of production, trade openness/index of production and terrorist attack on September 2001 on Twin Towers on the efficiency index of the Delhi International airport.While the first three variables have no significant impact on the efficiency index ,the terrorist act on September 2001 had a significant detrimental impact on passenger traffic and efficiency of the Delhi International Airport. However, Aircraft movements is significantly impacted by Foreign Investment/Index of Production (FI/IP) ,Reserves/Index of Production(R/IP) and dummy variable(D) of terrorist attack.The above results confirm that foreign direct investment and foreign exchange reserves could be used to upgrade air navigation system so that the Delhi Airport can have larger movements of aircraft's originating from Delhi International Airport.This could bring more revenues for the airport.The regression results also confirm that efficiency has more to do with efficient management and corporatization of airports rather than funding alone.The Airport Authority of India need to inculcate the spirit of professionalization in their day to day operations. The study also discusses various models of privatization and examines the benefits and costs of each one of them .The study gives framework of an efficient regulatory framework for the Airports in India.Given the limitations in India’s airport infrastructure, a more suitable method of privatization seems to be to introduce “competition for the market” in airport services, where an existing airport is given on a concession(long term leasing), through a competitive bidding process( as is done for Delhi ,Mumbai,Kolkata and Chennai airports). However, this essentially represents a case of a public monopoly being turned over to the private sector, and regulation is important to ensure that the private sector does not gouge airlines and passengers

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    Bibliographic Info

    Paper provided by EconWPA in its series Industrial Organization with number 0412010.

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    Length: 30 pages
    Date of creation: 17 Dec 2004
    Date of revision:
    Handle: RePEc:wpa:wuwpio:0412010

    Note: Type of Document - doc; pages: 30
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    Web page: http://128.118.178.162

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    Keywords: Data Envelopment Analysis; Technical Efficiency; Privatization ; Regulation;

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    1. Kneip, Alois & Park, Byeong U. & Simar, L opold, 1998. "A Note On The Convergence Of Nonparametric Dea Estimators For Production Efficiency Scores," Econometric Theory, Cambridge University Press, vol. 14(06), pages 783-793, December.
    2. Daniel J. Henderson & R. Robert Russell, 2005. "Human Capital And Convergence: A Production-Frontier Approach ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(4), pages 1167-1205, November.
    3. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-98, October.
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