DEVELOPING MEASURES OF AIRPORT PRODUCTIVITY AND PERFORMANCE: APPLICATION OF DATA ENVELOPE ANALYSIS

1. DEVELOPING MEASURES OF AIRPORT PRODUCTIVITY AND PERFORMANCE:APPLICATION OF DATA ENVELOPE ANALYSIS German Airport Project Presented by ; H.Engin Duran FHW-Berlin School of Economics

2. Agenda • 1.DEA TUTORİAL - Efficiency Basics -İnput and Output Oriented Analysis -The Efficiency /Profitability Matrix • 2. APPLICATION OF DATA ENVELOPE ANALYSIS -DEA Results including Terminal and Airside efficiency -Tobit’s Regression Analysis • 3.CONCLUSİONS

3. 1.DEA TUTORIAL • Definition of DEA ( Data Envelopment Analysis): Data envelopment analysis (DEA) is a linear programming based technique for measuring the relative performance of organisational units where the presence of multiple inputs and outputs makes comparisons difficult

4. 1.DEA TUTORİALWhat is efficiency? • Productive efficiency refers to producing a given output by using the minimum possibleamounts of inputs, or, producing the maximum possible output using a given amount of inputs. • Difficulty of efficiency measurement in multiple input and output case

5. 1.DEA TUTORİALRelative Efficiency Approach • In Multiple case relative efficiency approach :

6. 1.DEA TUTORİALRelative Efficiency Approach

7. 1.DEA TUTORİALRelative Efficiency Approach • Under these circumstances, efficiency of a target unit can be obtained as a solution to the following problem: Maximising the efficiency

8. 1.DEA TUTORIAL Relative Efficiency Approach • DEA modal to solved lineerly

9. 1.DEA TUTORIALOutput Oriented AnalysisSimulation of two outputs y1 and y2 and a single input e.g v1 (Y1.w1 + Y2.w2) / v1 = Relative efficiency Weights are to be found by solvıng the modal lineerly: Output oriented modal : Max Ho: Y1.w1 + Y2.w2 V1=100 (say) (Y1.w1 + Y2.w2) – v1 < 0

10. 1.DEA TUTORIALİnput Oriented Analysis

11. 1.DEA TUTORIALInput OrientedAnalysis • X1.V1 + X2.V2/ Y1 = Relative inefficiency Weights are to be found by solvıng the modal lineerly: Input oriented modal : Min Ho: X1.V1 +X2.V2 Y1=100 (say) X1.V1 +X2.V2 – Y1 > 0 = • Close to unity, higher efficiency

12. 1.DEA TUTORIALOutput OrientedAnalysis • Output versus input oriented DEA modal;

13. 1.DEA TUTORIALThe Efficiency /Profitability Matrix

14. 2.APPLICATION OF DATA ENVELOPE ANALYSIS DEVELOPING MEASURES OF AIRPORT PRODUCTIVITY AND PERFORMANCE: APPLICATION OF DATA ENVELOPE ANALYSIS David Gillen&Ashish Lall

15. 2.APPLICATION OF DATA ENVELOPE ANALYSIS DATA AND METHODOLOGY • Type of Data • Number of Airports ; (21 all from USA) • Information for each airport was assembled for the period 1989-1993. • 114 observations organized

16. 2.APPLICATION OF DATA ENVELOPE ANALYSIS • DATA AND METHODOLOGY Two Types of analysis to be held; • DEA and relative efficiency approach • Terminal Efficiency Analysis • Movement Efficiency Analysis • Tobit’s Regression Analysis

17. 2.APPLICATION OF DATA ENVELOPE ANALYSISDEA and relative efficiency approach • Terminal Efficiency Analysis Outputs: Number of passengers, Pounds of cargo İnputs: Number of runways number of gates, terminal area, number of employees, number of baggage collection belts and number of public parking spots. • Movement Efficiency Analysis Outputs:Air carrier movements, commuter movements Inputs:airport area, number of runways, runway area and number of employees

18. 2.APPLICATION OF DATA ENVELOPE ANALYSISDEA Results including Terminal and Airside efficiency

19. 2.APPLICATION OF DATA ENVELOPE ANALYSISDEA Results including Terminal and Airside efficiency

20. 2.APPLICATION OF DATA ENVELOPE ANALYSISDEA Results including Terminal and Airside efficiency

21. 2.APPLICATION OF DATA ENVELOPE ANALYSISDEA Results including Terminal and Airside efficiency

22. 2.APPLICATION OF DATA ENVELOPE ANALYSISDEA Results including Terminal and Airside efficiency

23. 2.APPLICATION OF DATA ENVELOPE ANALYSISDEA Results including Terminal and Airside efficiency

24. 2.APPLICATION OF DATA ENVELOPE ANALYSISDEA Results including Terminal and Airside efficiency • Interpretations regarding efficiency measurements; • In the majority of cases the index is falling implying an increase in efficiency ,basically can be explained by a reflect in part the emergence from the recession in the late 1980's. • Anchorage shows an increase in inefficiency for terminals but a reduction in inefficiency for movements reduction in passengers due to long haul jets being able to bypass this technical stop • The hub airports exhibit some loose similarities;As hubbing rises the terminal efficiency improves but movements efficiency decreases most likely due to the feed from small commuter aircrafts • Terminals whıch are doing better reflect new and expanding hub operations,traffic and economic growth (e.g. San Diego). • Those doing the same are well established hub airports.

25. 2.APPLICATION OF DATA ENVELOPE ANALYSISTobit’s Regression Analysis • Methodology;Set of Data; 4 set of Data is used; İndependent variables; dummy variables for the time period, dummy variables for hub airports,noise strategy variables and management operational and investment variables. Dependent Variables;Log of efficiency Index of movements,close to zero means more efficient .

26. 2.APPLICATION OF DATA ENVELOPE ANALYSISTobit’s Regression Analysis

27. 2.APPLICATION OF DATA ENVELOPE ANALYSISTobit’s Regression Analysis • Results and Interpretations regarding Tobit’s Regression for Movements: • The time dummies are not significant so there is no apparent trend in the data or anomalies in one year or another • The hub dummies show clearly that primary hubs increase the efficient use of the airside.The former hubs have a large number of feeder flights hence increasing the level of efficiency • Using a preferential flight path or limiting the hours of operation reduces inefficiency while all the remaining noise management strategies tend to increase inefficiency.

28. 2.APPLICATION OF DATA ENVELOPE ANALYSISTobit’s Regression Analysis • Results and Interpretations regarding Tobit’s Regression for Movements: • Limiting the hours an airport leads reducing inefficiency due to given limitations utilizes efficiency of airports ,Increasing the number of boarding gates can increase airside efficiency while increasing the number of runways has no impact • Financing strategy of airport leads to change in efficiency. Airports that have residual financing have a higher level of efficiency. Under residual financing the airlines are at risk for revenue shortfalls, thıs brings pressure to bear on the airport to ensure greater efficiency on the airside. • The preferred noise management strategy is to in fact limit operating hours and to use preferential flight paths would increase efficiency

29. 2.APPLICATION OF DATA ENVELOPE ANALYSISTobit’s Regression Analysis

30. 2.APPLICATION OF DATA ENVELOPE ANALYSISTobit’s Regression Analysis • Results and Interpretations regarding Tobit’s Regression for terminal: • Terminals at airports that are hubs operate at a higher level of efficiency than non-hubs. • The way in which gates are managed has an impact on efficiency. The greater the proportion of common and exclusive use gates the greater the reduction in inefficiency.In Common use of gates airports playing major role and take care for maximising efficiency at the mean time İn exclusive use of gates carriers do take care about efficiency • As the proportion of preferential use gates rises we get the opposite result; efficiency falls. A carrier which has preferential treatment may try to use gates as a barrier to entry and not necessarily use them efficiently

31. 2.APPLICATION OF DATA ENVELOPE ANALYSISTobit’s Regression Analysis • Results and Interpretations regarding Tobit’s Regression for terminal: • Having greater proportions of international passengers is one strategy which has a marked impact on improving terminal efficiency. • Adding gates is also effective but how one manages those gates is also important • Bigger terminals are not the solution to improving efficiency but allowing greater access to aircraft and passengers with greater numbers of gates will.

32. Conclusion • In the majority of cases the index is falling implying an increase in efficiency (or reduction in inefficiency). This can reflect in part the emergence from the recession in the late 1980's. • The best thing airport management is to improve efficiency is create pressures of productive and dynamic efficiency through corportization or privatization: 'residual financing' variable.

33. Conclusion • The productivity improvement is a combination of external market forces as well as internal firm reorganization and changing management incentives - intra-firm market forces • Most important items ; Airside Efficiency Having hubs , Expanding Gate Capacity Market Discipline Movement Efficiency Expanding number of gates in forms of common or exclusive but not preferantial

34. Conclusion • Is Carrying out such similar project possible for German Airports ? -Possible but difficulties exist; • Low number of international Airports • Lack of sufficient useful data

35. Thank you !