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An empirical investigation of the effects of managerial and ownership structure on the efficiency of North America’s airports Beaudoin, Justin

Abstract

Over the past several decades, the worldwide trend for airport ownership and management has been a gradual movement towards privatization and away from direct governmental management of airport operations. However, several factors have contributed to privatization not being adopted in North America up to this point. Instead, there has been a movement towards quasi-privatization in the form of not-for-profitlnon-share airport authorities. The principal objectives of establishing the authorities are three-fold: 1. To increase operational efficiency 2. To increase the commercialization of airports and become more responsive to user needs 3. To ensure financial self-sustainability of operations The objective of this paper will be to examine whether there is empirical evidence to support the hypothesis that the airport authority structure achieves these objectives. The airport industry in North America is characterized by four different managerial structures: Canadian airport authorities, US airport authorities, US city-run airports, and US port-run airports. After discussing the nature of the different managerial structures, 5 measures of productivity and efficiency are employed: 1. Variable Factor Productivity 2. Data Envelopment Analysis 3. Stochastic Frontier Analysis 4. Unit Cost Index 5. Operating Expense per Passenger The analysis is based on a set of panel data covering 72 airports over the 10-year period from 1996-2005. The efficiency measures obtained are then adjusted for operational factors deemed to be beyond managerial control, in order to obtain an indication of managerial efficiency. Multivariate regression analysis is then undertaken to assess whether efficiency varies according to managerial structure. This study found that there is strong evidence that the authority structure achieves higher operating efficiency, a greater degree of commercialization, and is characterized by more proactive management. It is highly likely that gains in efficiency in the United States could be achieved by a further movement away from city-managed airports towards the airport authority form.

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