Prof. Tae H. Oum - ATRS · Outline Objective of ... Variable Factor Productivity (VFP) Index Impossible - Total Factor Productivity (TFP) because of capital input cost accounting

Key Results of the 2010 ATRS Global Airport Performance Benchmarking Project

Prof. Tae H. Oum The Air Transport Research Society (ATRS)

www.atrsworld.org

The ATRS Global Airport Benchmarking Task Force Asia Pacific: P. Forsyth, Yeong-Heok Lee, Yuichiro Yoshida, Japhet Law

Europe: Nicole Adler, Jaap de Wit, Hans-Martin Niemeier, Eric Pels North America: David Gillen, Tae Oum, Bijan Vasigh, Jia Yan, Chunyan Yu

Outline

 Objective of the Benchmarking Study  Airports Included  Methodology  Key Results on Efficiency and Costs  User Charge Comparisons  Effects of Business Strategies  A Concluding Note

2

Objective of the Study   To provide a comprehensive, unbiased

comparison of airport performance focusing on

  Productivity and Operating/Mgt Efficiency  Unit Cost Competitiveness  Comparison of Airport Charge Levels

  Our study does not treat service quality differentials among airports

3

Airports Included in the study

Canada-U.S. 63 airports Europe 43 airports

12 airport groups Asia 27 airports 4 airport groups Australia and NZ 9 airports ---------------------------------------------------------- Total 142 airports and 16 airport groups

***Need your help to include more airports in our study; Can you help us with the data?

4

Data Sources: 2001-2008 (2009 data for airport user charges)

 Airport’s Financial Statements, Annual Reports and direct data requests;

 US FAA, DOT statistics;  Association of European Airlines (AEA) Statistics  ICAO Digest of Statistics:

  annual and monthly traffic data   annual financial data - not for all airports

 ACI; IATA   annual traffic statistics; Capacity information   general information surveys (Asia Pacific and

Europe) occasional and not complete  IMF and World Bank – various price indices including

GDP deflators for service sectors and PPP  US Census Bureau, Statistics Canada – regionally

based Cost of Living Index 5

Some Characteristics of Sample Airports

6

Passengers in Millions

– Europe (2008/06/04)

7

© Air Transport Research Society

Passengers in Millions

– Asia Pacific

(2008/06/04)

8

Passengers in millions

N. America

(2008/06/04)

9


Concession Revenue Shares – Europe

Individual Airports Authorities Individual Airport Authorities

10


Concession Revenue Shares – Asia-Pacific

11

Concession Revenue Shares – N. America

12

Outline

 Objective of the Benchmarking Study  Airports Included

 Methodology  Key Results on Efficiency and Costs  Airport User Charge Comparisons  Effects of Business Strategies  Conclusions

13

Methodology: EFFICIENCY MEASUREMENT

 Variable Factor Productivity (VFP) Index

 Impossible - Total Factor Productivity (TFP) because of capital input cost accounting problem

 Unit Operating Cost Competitiveness Index: Combines VFP and Input Price Index

 We explored Alternative approaches we have explored:   Data Envelopment Analysis (DEA)   Econometric Cost Function Approach including

Stochastic Frontier methods Note: Industry acceptance of our report using more

advanced/sophiscated methods is one of our major concern� 14

Airport Productivity Index

Outputs Inputs

•  Aircraft movement •  Passengers •  (Cargo) •  Other revenues

including concessions

•  Labour •  Other non-capital (soft

cost) inputs •  Physical capital

measures: o  Runways o  Terminals o  Gates

15

Potential Reasons for the Measured Productivity (gross VFP) Differentials�

Factors Beyond Managerial Control: –  Airport size (Scale of aggregate output) –  Average aircraft size using the airport –  Share of international traffic –  Share of air cargo traffic –  Extent of capacity shortage - congestion delay –  Connecting/transfer ratio

We compute ‘residual (net)’ productivity measures after removing effects of these Factors

16

Outline

 Objective of the Benchmarking Study  Airports Included  Methodology  Key Results on Efficiency and Costs  Airport User Charge Comparisons  Effects of Business Strategies  Conclusions

17


Residual (Net) Variable Factor Productivity: Overall Operating/Managerial Efficiency Measure – Europe

18


Residual (Net) Variable Factor Productivity: Overall Efficiency Measure – Asia Pacific

19


Residual (Net) Variable Factor Productivity: Overall Efficiency Measure – Asia Pacific

20


Seoul-Gimpo (SEL) Airport experienced a Remarkable Turnaround�

  When new Seoul-Incheon Airport (ICN) opened in 2001, Korean govt transferred all int’l flights from SEL to ICN Drastic reduction of flight, passengers, and revenue

  Korea Airports Corporation (KAC) responsible for SEL airport operation, has led a remarkable turnaround success by making use of severely underutilized facilities and airport lands for generating commercial (non-aeronautical revenue), and by under-taking a series of important cost saving measures

  Not so successful in other similar cases where Int’l services shifted to new airports: e.g. KIX vs. Osaka-Itami, Pudong-Hong-Qiao in Shanghai, Bangkok, etc.

21

© Air Transport Research Society 22



Residual (Net) Variable Factor Productivity: North America – Passengers > 15 million

25

Residual (Net) Variable Factor Productivity: North America – Passengers < 15 million

26


Top Efficiency Award Winners (based on Net VFP index=operating/management efficiency)

Europe:   Large Airports (> 15 million pax): Olso, Copenhagen   Small/Medium Airports (< 15 millions Pax): Geneva,,

Ciampino Asia-Pacific:

  Large airports (> 15 million PAX): Hong Kong, Sydney   Small airports (< 15 million PAX): Seoul-Gimpo, Perth

North America (Canada/US):

  Large Airports (> 15 million pax): Atlanta (also the Global Top Performer), Minneapolis/St Paul

  Small/Medium Airports (< 15 millions Pax): Raleigh-Durham, Richmond (VA)

27

Cost Competitiveness – Europe = Net VFP and Input Prices

28


Cost Competitiveness – Asia Pacific

29

Cost Competitiveness –North America Passengers > 15 million

30

Cost Competitiveness –North America Passenger < 15 million

31


Top Unit Cost Competitiveness Performers

 Europe:   Polish Airports, Athens, Tallinn(Estonia), Rome-

Ciampino  Asia-Pacific:

  Haikou (China), APII (Indonesian group), AAI (Airports Authority of Inida), AOT (Airport Authority of Thailand)

 N. America (Canada/US):

  Large Airports (> 15 million Pax): Atlanta, Charlotte, Tampa

  Small/Med Airports (< 15 million Pax): Raleigh-Durham, Richmond (VA), Nashville,

32

Outline

 Objective of the Benchmarking Study  Airports Included  Methodology  Key Results on Efficiency and Costs  Airport User Charges Comparison  Effects of Business Strategies  Concluding Note

33

34


36

37

Summary – Landing/Takeoff Charges

 European Results:   Highest charges: Dusseldorf, Birmingham, Ljubljana

(Slovania)   Lowest charges: Berlin-Tegel, STN-off-peak, Stockholm  Asia-Pacific Results:

  Highest charges: Wellington, Kansai, Narita   Lowest charges: Kuala Lumpur, Bangkok, Dubai  North American Results:   Highest charges: Toronto, LaGuardia, Newark,   Lowest charges: Charlotte, Raleigh-Durham, Tampa

38

Outline

  Objective of the Benchmarking Study   Airports Included   Methodology   Key Results on Efficiency and Costs   Airport User Charge Comparisons   Effects of Business Strategies   Conclusions

39

Effects of Business Strategies

 Diversification of Revenue Source is good: –  Airports with larger share of non-aeronautical revenue

achieve higher efficiency (Net VFP)

 Outsourcing:   Airports contracting out various services to outside

operator achieve higher efficiency   Outsourcing terminal operations improve efficiency

40

A Final Note

  The ATRS Global Airport Performance Benchmarking Report : 3 volumes, over 500 pages of valuable data and analysis

  Can be purchased by visiting

www.atrsworld.org   Report sale finances our annual

benchmarking research project

41

Thank You

Documents

Prof. Tae H. Oum - ATRS · Outline Objective of ... Variable Factor Productivity (VFP) Index Impossible - Total Factor Productivity (TFP) because of capital input cost accounting