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Efficiency in Italian Airport Management: Implications for Regulation

This paper discusses the application of DEA technique to Italian airports, analyzing performance differentials in aircraft and passenger movements, and providing regulatory suggestions based on relative and absolute performance. The study offers insights into efficiency and regulation in the airport sector.

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Efficiency in Italian Airport Management: Implications for Regulation

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  1. Efficiency in Italian Airport Management: The Implications for RegulationbyP. Malighetti et al. Comments by Diego Piacentino Workshop Hermes 2007: Quale futuro per il settore del trasporto aereo? Moncalieri (Torino), 29 gennaio 2007

  2. Contents • Introduction • Data and technique • Interpretation of results • Implications for regulation

  3. Introduction • DEA studies are routinedly conducted with respect to the performance of airports (some references are given in the paper) • But this is the first attempt to apply DEA technique to Italian airports • This is a remarkable fact in itself • It is an important contribution in the direction of making analysis more technical, and less dependent on qualitative judgement and casual empiricism

  4. Data and technique • I have little to say about technique (I am not a practictioner of this sort of analysis) • Standard application of input-oriented DEA (little influence of airport management on output levels—however, this is possibly less true for regional airports, and for low-cost connections) • Outputs: aircraft movements and passengers: freight? • Only inputs used in the production of outputs? Airports have an advantage in bringing inputs—and costs—within the regulated till • Quality of output?

  5. Interpretation of results • Three questions (or conjectures) • Aircraft movements vs. passengers movements: may the performance differential be explained by the different impact of discontinuities and rigidities? • Performance change: little or no effect of differences (changes) in the structure of ownership? • Performance change—the airports fare better than the whole economy: a possible consequence of traffic increase and thus better use of available capacity? (Increasing returns to scale)

  6. Implications for regulation • The paper has two main suggestions for regulation: X in the price-cap formula should not exceed 1.58 for aircraft movements and 1.27 for passenger movements • DEA informs on performance differentials with respect to the best current practices—it is concerned with relative performance • But X is meant to drive performance to optimal (feasible) practice—it is concerned with absolute performance • This is not a minor problem, as airports have a long story of public management and monopoly protection—with inefficiency as a likely effect

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