The dilemma between capacity expansions and multi-airport systems: Empirical evidence from the industry's cost function
This paper explores the problematic of airport capacity expansions from the perspective of the airport financial management, using the operating costs as the variable of interest. The objective is to provide empirical evidence on the financial advantages of expanding capacity against the operation of multi-airport systems (MAS) under the presence of significant returns to scale in airport operations. This is done by comparing the actual operating costs of the MAS with the predicted costs that correspond to the aggregated level of output and input prices. Predictions are obtained from a multi-output specification of the industry's cost function, estimated with a broad database of international airports. The results indicate the presence of non-exhausted scale economies at the current levels of production. Hence, the atomization of air traffic always increases operating costs at a system level. In the last section, the degree of economic inefficiency of five European MAS is calculated. These results also provide revealing conclusions about the size of the industry's minimum efficient scale. Furthermore, the use of data on American MAS allows us to separate the inefficiency costs derived from the atomization of air traffic from those related to the individual airports' inefficient behavior.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 47 (2011)
Issue (Month): 3 (May)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/bibliographic|
When requesting a correction, please mention this item's handle: RePEc:eee:transe:v:47:y:2011:i:3:p:382-389. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.