Privatization, Commercialization, Ownership Forms and their Effects on Airport Performance

Transcription

1 Privatization, Commercialization, Ownership Forms and their Effects on Airport Performance Tae H. Oum and Chunyan Yu The Air Transport Research Society, and Sauder School of Business University of British Columbia, Canada (with Nicole Adler and Chunyan Yu)

2 Outline Introduction Literature summary: Privatization, Ownership and Firm s Performance Modelling the Effects of Airport Ownership Data Sources, Sample Airports and Variable Construction Empirical Results Summary and Further Research Needs

3 Introduction Worldwide Trend - Corporatization, commercialization, and privatization of airports Access to private sector capital To improve productive efficiency Different models of ownerships and governance: 100% privatized mixed ownership with private majority mixed ownership with government majority public corporation independent airport authority multi-level government corporation Government branch ownership and operations U.S. Airports have remained mostly as government-owned and operated

4 Objective of the Paper To examine the effects of ownership forms, and governance structures on airport performance in terms of their productive efficiency, profit, and user charges.

5 Literature Summary on Firm s Performance Agency theory and strategic management literature suggest that ownership form influences firm performance because different owners pursue different goals; design different incentives for managers; A common view: government-owned firms are less efficient than their private sector counterparts operating in similar environment.

6 Literature summary on firm s performance cont d Government firm s efficiency performance depends heavily on governance structure, and degree of management autonomy; Some say that many US airports enjoy high degree of autonomy, and thus, are among the most privatized in the world. Privatized firm s efficiency performance depends heavily on whether or not its product market is competitive. privatized airlines and telecom firms became very efficient since they face competitive market; but not sure about monopoly infrastructure like airports, ANS; performance depends partly on type of regulation

7 Modelling the Effects of Airport Ownership and Governance Structure Productivity levels as a function of: Ownership and Governance Form Management Strategy Variables Airport Characteristics and Business Environment The remainder: Technical (residual) efficiency

8 Modelling the Effects of Airport Ownership and Governance Structure cont d Ownership forms investigated: US govt and city owned airports, 100% govt owned corporation, Independent airport authority, mixed ownership with a government majority, mixed ownership with private sector majority, multi-level government corporation, BASE: government branch run airport (outside of the U.S.A.)

9 Modelling the Effects of Airport Ownership cont d Management Strategies Extent of business diversification (non-aviation commercial activities) Degree of outsourcing Airport Characteristics (beyond managerial control): Airport size Average size of aircraft Composition of airport traffic. Capacity Constraint

10 Variable Factor Productivity (VFP) Index number approach: TFP = Output Index / Input Index VFP = Output Index / Variable Input Index * Alternative methods of measuring efficiency (variable cost function method, and stochastic frontier cost function method) are being compared for our 2006 airport benchmarking report.

11 Airport Inputs and Outputs Inputs Outputs -Labor - Other non-capital (soft cost) inputs - Aircraft movements (ATM) - Passengers handled - Non-aviation output including commercial services - (Cargo could not be included revenue not available separately)

12 Data Sources Airport Annual Reports and direct requests; US FAA, DOT statistics; ICAO Digest of Statistics: annual financial data -- not for all airports ACI; IATA annual traffic statistics Capacity information IMF and World Bank various price indices including GDP deflators for service sectors and PPP

13 Selective Airport Characteristics

14 Sample airport characteristics Share of International Passengers (2003) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% YYZ YUL YVR JFK MIA YYC LAX EWR HNL IAD YOW SFO BOS IAH YEG YHZ ORD PHL DFW SEA DTW FLL ATL MCO CLT CVG LG A MSP BWI BNA PHX PIT MEM LAS TPA DEN RDU STL SJC OAK CLE DCA SAN PDX IN D MDW SLC MSY MCI SMF AMS BRU PRG GVA CIA VIE DUB ZRH CPH CDG LHR LG W WAW MAN BHX STN MXP LIS DUS HEL MUC ARN IST CGN HAM FCO BCN MAD OSL TXL ORY EDI Aer Rianta FRA BAA ANA CAA(FIN) ADR CAA(SWE) BER MFM HKG IC N SIN TPE NRT BKK KIX KUL AKL MNL PVG PEN DEL HKT BO M SYD PER CNS CGK PEK CHC BNE MEL HDY CAN WLG CNX ADL SEL SHA

15 Sample airport characteristics Passengers per Aircraft Movement (2003) JFK MCO ATL LAX SFO MSY MIA SEA ORD LAS DEN SAN IAH EWR DFW PHX DTW YYZ TPA MSP BWI STL FLL HNL LGA BOS YVR MDW DCA SMF SJC PHL MCI CLT IAD SLC PDX YOW YEG CVG CLE PIT OAK YYC IND RDU BNA YUL YHZ MEM LHR LGW HEL STN ORY AMS MAN CDG MAD DUB FCO IST LIS TXL MXP BCN OSL DUS HAM BHX EDI CPH MUC ARN VIE PRG ZRH BRU GVA CGN CIA WAW CAA(SWE) BAA ADP FRA Aer Rianta ANA ADR CAA(FIN) BER BNE KIX NRT ICN BKK HKG HKT SIN HDY CNX KUL TPE SEL PVG CGK PEK PER SYD MFM SHA PEN MNL CNS AKL CHC ADL WLG

16 Sample airport characteristics Figure S-5: Aeronautical Revenue Shares (2003) Passengers per Aircraft Movement North America Europe Asia Pacific PHL MEM JFK PIT SFO MSY EWR LG A DEN YYZ ORD CLE CVG MIA STL PDX YEG DFW IAH SEA IAD YHZ YOW YYC SLC DTW CLT DCA BWI SAN BOS MSP YVR IN D LAS MDW OAK BNA LAX PHX HNL MCO RDU FLL ATL SJC SMF YUL TPA MCI LIS WAW CGN EDI PRG CPH ZRH OSL LHR GVA AMS LG W VIE HAM STN MUC CAA(FIN) CAA(SW B e r lin ANA Fraport ADR BAA Aer KIX NRT WLG (04) PEK TPE IC N HKG SIN (02) ADL SYD CHC PER SEL AKL BNE CNS AAI AOT MAHB MEL/APA JFK MCO SFO ATL LAX IAH SEA ORD DFW YYZ MIA MSP TPA LGA FLL BOS PHL CLT YVR SLC IAD CVG CLE RDU YHZ YYC LHR LGW ORY FRA AMS CDG FCO MXP OSL DUS MUC ZRH CPH EDI ARN VIE PRG HAM GVA LIS WAW NRT ICN SIN BKK HKG KIX SEL KUL PEK MEL PER PVG SYD BNE AKL WLG 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

17 Figure S-6 Revenue per Passenger (2003) US$ North America Europe Asia Pacific

18 Results on Operating Efficiency -VFP Table 3: Variable Factor Productivity Regression Results Log-Linear Model (Base ownership: airport with a private majority) Model Dependent Variable VFP VFP VFP Coeff. t-stat Coeff. t -stat Coeff. t-stat Intercept Output Scale (Index) Runway Utilization (ATM per Runway) Aircraft size (Pax /ATM) * Europe * Asia-Pacific %International * Europe * Asia-Pacific %Non Aviation %Cargo Asia Europe Oceania Ownership/Governance Form Dummy Variables: U.S. Govt Department N. America Airport Authority 100% Public Corporation Mixed Ent. (majority-gov) Multi-Gov shareholders R Adjusted R Log-Likelihood Value Observations (n)

19 Private majority airports focus more on commercial revenue Table 4 Ownership Form vs Shares of Non Aeronautical Revenue Groups Count Sum Average Variance N. American Airport Authorities % Public Corporation % Government majority % Private-Majority % Multi-Government % US Government Dept % Source of Variation SS df MS F Between Groups Within Groups Total

20 Private majority airports achieve higher operating margin Table 5 The Effects of Ownership on Operating Margin Groups Count Sum Average Variance N. American Airport Authorities % Public Corporation % Government majority % Private-Majority % Multi-Government % US Government Dept % Source of Variation SS df MS F Between Groups Within Groups Total

21 Private majority airports do not charge higher aeronautical fees Table 6b The Effects of Ownership on Airport Charges Aeronautical Revenue per Work Load Unit* Groups Count Sum Average Variance N. American Airport Authorities Public Corporation Government majority Private-Majority Multi-Government US Government Dept Source of Variation SS df MS F Between Groups Within Groups Total * A Work Load Unit (WLU) defined as one passenger or 100 kg of cargo.

22 Empirical Results on Ownership Forms Corporatized Airports owned/operated with govt majority is less efficient than those owned by private majority or 100% gov t corporation; NO statistical evidence indicating that airports with private majority are more efficient than airports owned/operated by US. govt branches (mostly city departments) or 100% public corporations (note: privatized airport also has monopoly power, not necessarily more efficient). Airports operated by U.S. and Canadian Airport Authorities are no more efficient than the airports operated by US govt branches (mostly city departments); Airports with government majority and airports owned by multiple governments are the least efficient.

23 Empirical Results on Ownership Forms cont d Airports with private majority achieved significantly higher profit margins than others, despite the fact that they generally levy lower aeronautical charges (because of their vigorous pursuit of commercial opportunities). Airports with extensive outsourcing achieve higher efficiency

24 Further research: Building more time-series data (longer panel data); Use of alternative methods for such as variable cost function, stochastic frontier cost functions, etc. and DEA.

25 Thank You 2006 ATRS World Conference: Nagoya Japan, May; 2007 ATRS World Conference to be hosted by UC-Berkeley; June, 2007 ATRS Global Airport Benchmarking Reports 5 th Year