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The impact of recession on airports' cost efficiency

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  • Voltes-Dorta, Augusto
  • Pagliari, Romano

Abstract

The recent economic downturn took a severe toll on the aviation industry, leading to a significant contraction in air transport demand. In spite of that, airports' operating costs did not mirror the declining traffic trends and continued to increase during the same period. This paper sought to estimate the impact of the recession on airports' cost efficiency and financial performance. This is achieved by estimating the industry's short-run cost frontier over a balanced pool database of 194 airports observed between 2007 and 2009. Results show that airports struggled to control operating costs during the recession. Efficiency losses were estimated to be in excess of USD 5.5 billion, contributing to a significant reduction in industry operating margin. Results also suggest that airports that are corporatised and have not pursued extensive out-sourcing of activities are better able to manage their costs during periods of economic recession.

Suggested Citation

  • Voltes-Dorta, Augusto & Pagliari, Romano, 2012. "The impact of recession on airports' cost efficiency," Transport Policy, Elsevier, vol. 24(C), pages 211-222.
  • Handle: RePEc:eee:trapol:v:24:y:2012:i:c:p:211-222
    DOI: 10.1016/j.tranpol.2012.08.012
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    Cited by:

    1. Voltes-Dorta, Augusto & Lei, Zheng, 2013. "The impact of airline differentiation on marginal cost pricing at UK airports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 55(C), pages 72-88.
    2. Örkcü, H. Hasan & Balıkçı, Cemal & Dogan, Mustafa Isa & Genç, Aşır, 2016. "An evaluation of the operational efficiency of turkish airports using data envelopment analysis and the Malmquist productivity index: 2009–2014 case," Transport Policy, Elsevier, vol. 48(C), pages 92-104.
    3. Tolga Ülkü & Vahidin Jeleskovic & Jürgen Müller, 2014. "How scale and institutional setting explain the costs of small airports? -An application of spatial regression analysis," MAGKS Papers on Economics 201435, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Castillo-Manzano, José I. & Pedregal, Diego J. & Pozo-Barajas, Rafael, 2016. "An econometric evaluation of the management of large-scale transport infrastructure in Spain during the great recession: Lessons for infrastructure bubbles," Economic Modelling, Elsevier, vol. 53(C), pages 302-313.
    5. Coto-Millán, Pablo & Casares-Hontañón, Pedro & Inglada, Vicente & Agüeros, Manuel & Pesquera, Miguel à ngel & Badiola, Alfonso, 2014. "Small is beautiful? The impact of economic crisis, low cost carriers, and size on efficiency in Spanish airports (2009–2011)," Journal of Air Transport Management, Elsevier, vol. 40(C), pages 34-41.

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