Medidas de la asociación entre dos variables

airports to develop their activity

Prior to the liberalisation of air transport, to the extent to which the airlines’ economic decisions were constrained by the bilateral air service agreements and thus by political decisions, the airports’ destiny was connected to the airlines’ one and the airport business was limited to the operational one. Airports had not much scope for strategic development.

The liberalisation of the air transport within the EU and the subsequent negotiation of more liberal air service agreements with third countries, although being addressed to airlines, extended the scope of actions for airports. In particular the emergence of new carries, such as low-cost airlines, created new opportunities for airports and especially for a number of airports which handled only small traffic volumes in the past. Existing carriers also adapted their business models thus creating new possibilities. This tendency was reinforced by the general growth in air traffics for the benefit of a large number of airports.

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At the same time, the liberalisation introduced some kind of business risk which did not exist before and which results from changes in airline behaviour and from the emergence of, at least to a certain extent, competition for airlines, air services and passengers/freight.

In this situation, emphasis is placed on the airport’s capacity to deal with the other parties involved in air transport, and in particular with airlines. In addition, attention has to be paid to all conditions which allow airports not only to ensure actual development but also to safeguard future development, such as the management of environmental problems or of capacity constraints. By the removal of a very restrictive framework, airports got more room for manoeuvre but were at the same time also forced to play a part in air transport, to be proactive, to define their own strategies... thus emerging as strategic actor in a very dynamic air transport market.

The importance of this development appears in a particular light when considering the characteristics of the airport industry with which deals the sixth chapter.

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6.

The airport industry

With the liberalisation of air transport which resulted in the removal of restrictive air service agreements, airports were pushed in a situation that is characterised by more freedom for developing their activity but also by a higher degree of uncertainty and an increased business risk. In view of this evolution, the economic characteristics of airports are of a particular interest as they may influence the strategies on which airports embark. Commercial activities provide additional financial resources which not only may ensure profitability to shareholders but also contribute to broadening the airport’s room for further action. If profitability has got an issue to airports, this is due to the withdrawal of state funding and the arrival of private shareholders. At the same time, changes in the management and organisation of airports contribute also to increasing the airport’s freedom of action.

6.1.

Economic characteristics of airports

Airports consist in large investments that are characterised by a high degree of asset specificity. They are fixed in their location and use. Possibilities to transfer airport infrastructure to another place or to use it otherwise are very limited. For this reason, they have no value if they become redundant. Airports have a long life expectancy which poses a problem as regards investment and maintenance. As the future is uncertain, investment in airports is quite risky, especially as recent developments give reason to consider that the evolution of air transport over the next decades could be different from the spectacular growth that commercial air transport has known in the past. The development of air transport depends on many factors that cannot be influenced by airport operators. Among these factors figure the increasing oil price – most notably in the medium and long term and especially illustrated by its sharp rise in the first half of 2008 even though the situation has eased since – making air transport more expensive but also a growing environmental awareness wishing to assign air transport a more reasonable place within the transport system in general. This implies the transfer of a part of the air traffic on the railway, the inclusion of air transport in emission trading, at least on a European scale, and the imposition of restrictions on the activity of certain airports.

Airports have more or less strong public goods characteristics.230 As regards the principle of non-rivalry, it can be observed that there is no rivalry in consumption: It is possible to use an infrastructure several times without modifying it; an additional user does not reduce the utility that another costumer has from using this infrastructure. Concerning the principle of non- excludability, it does not apply to airports and to air transport in general as access can quite easily be controlled and thus individuals can be prevented at reasonable cost from

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consumption.231 This is important as it means that airports can charge the use of infrastructure to e.g. the airlines’ and passengers’/shippers’ account. However, another problem concerns airports: congestion since a number of airports work at the capacity limit and achieve saturation threshold at least during rush hours. At congested airports, consumption gets rival with consequences on the structure and the level of airport charges that may represent an instrument for reallocating capacity. It also attracts notice to the mode of allocating airport slots.

6.1.1. Cost structure characterised by high labour and capital costs

Considering all activities, the airport’s cost structure232 is characterised by high labour costs and high capital charges. On average, about 42 % of total airport expenditure consist in labour costs. According to the degree to which airports are involved in the different activities, they vary in general between 30 % and 65 %. As Doganis (1992) underlines, labour costs are particularly high if an airport is much involved in providing the different services and at the same time does not charge depreciation on fixed assets. On average, capital expenditure represents about 22 % of total airport costs, ranging between 20 % and 35 % for most airports. Nevertheless, due to accountancy practices, at some airports the share of capital costs amounts to only 10 %.233 Findings of an analysis of the evolution of the cost structure of 19 European airports234 between 1983 and 2001 carried out by Graham A. (2003, p. 58 Table 3.3 and 3.4) are in line with these results. In 2001, labour and capital costs represented on average 33 % and 24 % of total airport expenditure respectively. Nevertheless, the distribution of airport costs varies at individual airports reflecting according to Graham A. (2003) differences in the functions carried out by airport operators. Whereas labour costs are below average at airports like Oslo, London Heathrow, Basel-Mulhouse, Amsterdam, Brussels and Zurich (between 21 % and 24 %) which do not fulfil so many functions, they are of high importance at airports like Rome, Dusseldorf, Frankfurt, Milan and Vienna which provide themselves handling services. From 1983 to 2001, the share of labour costs has decreased which can be explained in part by a growing tendency for airport operators to outsource certain activities

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The number of access points to air transport is limited facilitating the control of access for planes or passengers/freight, contrary to certain infrastructure where excluding users is practically or economically impossible, i.e. difficult or expensive, especially as too many access points exist. As regards passengers, almost all air transport is commercial and the validity of ticket is checked before entering the airport’s area reserved for passengers. Access is also controlled for freight and of course for aircraft.

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Note that there is little uniformity in the treatment of costs making it difficult to compare costs between airports, even within a limited geographical area like Europe. The following figures refer to results published by the Transport Studies Group, Polytechnic of Central London, and refer to a study of about 25 Western European airports realised in the 1980s where authors tried to reproduce the airports’ accounts on a common cost basis (Doganis, 1992, p. 45).

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These results were confirmed by Wolf (2003, p. 35) who examined the cost structure of German airports according to different activities in 1997. He found that at airports with high traffic volume operational services were labour intensive (45 - 60 % of operational expenditure) and characterised by high capital expenditure (15- 25 % of operational expenditure).

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Including Amsterdam, Basel-Mulhouse, Birmingham, Brussels, Copenhagen, Dusseldorf, Frankfurt, Geneva, Glasgow, Milan, London Gatwick, London Heathrow, Manchester, Marseille, Paris, Rome, Oslo, Vienna and Zürich.

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and in some cases by a higher productivity of labour. Moreover, at some airports the increasing depreciation on fixed assets can be explained by additional investment in airport infrastructure and a better consideration of capital charges due to changes in the accounting system following the transfer of some airports from public sector to more commercial practices.

As regards the different types of activities, operational services, ramp and terminal handling as well as commercial services are all labour intensive but there are differences in reversibility of costs. While technical installations for operational services represent largely irreversible costs as they are adapted to a high degree to local requirements (e.g. baggage sorting and transportation systems), ramp and terminal handling do not necessitate site-specific investment in fixed assets. Special vehicles are used but, as they are mobile, they can be easily transferred to other airports if necessary. Commercial activities necessitate small irreversible costs as the surfaces can be used for other activities (Wolf, 2003, p. 38).

Finally, the airport cost structure does not only depend on the services which are provided by the airport itself but also on the type of traffic and the operation mode. For instance, international passengers do not have the same needs as domestic passengers: In general, international passengers need more terminal space e.g. for going through customs and immigration. On average, they have also more baggage to be handled. On the other hand, international passengers tend to spend more money on commercial activities, like catering and retailing. If a hub airport organises its traffic in waves (also referred to as banks), this is very attractive for airlines and passengers but particularly cost intensive for the airport as it necessitates a higher capacity reserve and more coordination than an evenly spread traffic. Airports relying on holiday destinations may also have higher costs as traffic is concentrated on a few months leaving capacity unused the rest of the year. On the other hand, some airports provide terminals which are dedicated to low-cost or charter traffic. These special terminals have only basic facilities (e.g. no airbridges) allowing the airport to charge less as costs are low (Graham A. , 2003, p. 60).

6.1.2. Significant economies of scale but decreasing as traffic grows

As regards capacity, airport operations are characterised by significant economies of scale as a result of high fixed costs. Consequently, the average cost per unit of traffic declines as airport traffic increases.235 Quinet (1998) summarised that productivity effects concern terminals, runways, and even air traffic lanes: As regards terminals, it can be observed that until 20 million passengers, at equal capacity used, total costs do not increase as rapidly as traffic, and, at a given terminal size, operation expenses grow slower than traffic; strong

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Wolf (2003, p. 27) notes that detailed analysis on the cost structures of airports does not exist. The most cited studies in literature indicate only that the airport activity as a whole is characterised by economies of scale, without differentiating between several services provided by airports. For this reason, it is unknown in which fields of airport activity economies of scale and economies of scope exist. However, the cited studies, even though referring to the airport activity as a whole, give an insight into the question if an effective competition between different airports is conceivable in the long term.

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productivity effects can be observed as regards runways and air traffic lanes236 which are also characterised by high fixed costs. However, the question is if from a certain output level maybe production costs remain unchanged or even start to rise...

Distinguishing between airport costs that are related to the terminal building thus being a function of passenger flows and those associated with the runways system thus depending on the number of processed aircraft, empirical evidence suggests the existence of economies of scale in landing operations, i.e. the cost per unit of traffic declines if the traffic increases, whereas handling passengers inside the terminal is characterised by decreasing returns to scale since the required time to process a passenger through a terminal grows with airport size. Hence, the optimal dimension of an airport would depend upon a delicate equilibrium between both elements (Walters, 1978).

According to Doganis (1992, pp. 48-49) early studies of British airports indicated a fall in unit costs as traffic increases, in particular up to 1 or 1.5 million passengers, but they stabilise at around 3 million passengers although, according to these older studies, there is no evidence for any significant internal diseconomies of scale in the long term leading to growing unit costs as airports achieve a certain traffic level. Nevertheless, congestion may cause a rise in unit costs in the short term. Also, there may be external costs relating to noise or congestion in surface transport around the airport that are growing as airport traffic increases leading to external diseconomies of scale.

Economies of scale have been largely discussed in literature and results confirm the idea that airport infrastructure is characterised by strong economies of scale but they seem to decrease as traffic goes beyond a certain level. Quinet (1998) summarises results from different publications, such as of Keeler (1973), Doganis and Thompson (1975) and Tolafari, Ashford and Caves (1990) and of own works (Quinet, 1992): Keeler (1973) and Doganis and Thompson (1975) observed constant returns to scale. While Doganis and Thompson (1975) used a Cobb-Douglas function, Tolafari, Ashford and Caves (1990) estimated a translog function for studying costs of British airports. For this purpose, they considered separately operation expenses and total costs (corresponding to optimised infrastructure). Whereas operation expenses allowed to calculate short run marginal and average costs, total costs led to long term marginal and average costs. The authors concluded that short run marginal costs were much lower than average costs (in proportion of 1 to 2 times lower which means that short run marginal costs were contained between half the short run average cost and the short run average cost.) This difference can be explained to some extent by the fact that infrastructure is in general oversized and thus real capacity is greater than optimal capacity. This may result from indivisibilities. However, if capacity was optimal, there would be still large economies of scale (in the region of 1.4). Studies being realised on the basis of French statistics confirmed this aspect and revealed economies of scale that decrease as the size of the airport grows and are about 1.1 (Quinet, 1992).

Wolf (2003) concluded from two studies realised by Doganis et al., the first one on 18 British airports for 1969/1970 (Doganis & Thompson, 1973, p. 53ff), the second one on 25 European

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airports for 1994 (Doganis, Lobbenberg, & Graham, 1995, p. 44ff) that economies of scale play only a small role for intramodal competition between airports from a traffic volume of 5 to 10 million WLU p.a. In fact, Doganis and Thompson (1973) observed that total average costs of the airport activity were decreasing until an output of about 1.5 to 2.5 million WLU and were characterised by strong economies of scale. However, if traffic volume was higher, only little economies of scale or no return to scale could be observed. Given the technical progress realised in the meantime, figures observed in the first study can be considered as absolute minimum level. In the second study (Doganis, Lobbenberg, & Graham, 1995, p. 44ff) airports were classified according to three regions (Southern Europe, United Kingdom/Ireland and Northern Europe). The first two groups were characterised by strong economies of scale up to 5 million WLU. As regards the third group, a significant correlation between average costs and traffic volume could not be observed as differences in costs were too large. However, as airports within this group were relatively big, differences in traffic volume had only little importance.

In conclusion, most studies indicate that airports are characterised by economies of scale but they tend to decrease as airport traffic grows so that bigger airports may operate at constant returns to scale. At the same time, some research suggests that airports which get very large will see their average costs start to rise as the operation of the airport system gets more complex and more costly and necessitates e.g. more coordination. Airports being likely to be characterised by increasing, rather than decreasing long-run costs at quite moderate levels of output was argued by Starkie and Thompson (1985) to be related to the likely outcome of the complex way in which airports grow in size from a central core. “[E]conometric evidence is now beginning to emerge that lends some support to the general proposition that major airports can experience diseconomies of scale” (Starkie, 2001, p. 124). This results e.g. from studies made by Gillen and Lall (1997) and Pels (2000) who concentrated on measuring efficiency237 of airports and thus examined also returns to scale . While Gillen and Lall (1997) referred to US airports, Pels (2000) examined European airports. Nevertheless, both authors drew similar conclusions. Using the estimates of the stochastic frontier model, Pels (2000)238 concluded that the “average”239 airport is working under constant returns to scale when handling aircraft movements and increasing returns to scale as regards the number of passengers. The scale elasticity is decreasing in the number of passengers which means that on average smaller airports are operating under strong returns to scale while larger airports are operating under weak returns of scale. This relation is rather strong when considering the

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In order to create performance measures, Gillen and Lall (1997) and Pels (2000) referred to the production frontier which can be determined by two methods: data envelopment analysis and stochastic frontier analysis. Both methods use a set of inputs (like the number of runways, parking positions, terminal surface, etc.) and outputs (such as the number of aircraft handled or of passengers transferring through the airport). Their advantage consists in not considering prices. Gillen and Lall (1997) point out that data envelopment analysis been used for determining productivity in schools, university and government institutions as their outputs are not easily or clearly defined. Besides, this approach is useful if natural prices are lacking. For more information about data envelopment analysis and stochastic frontier analysis see Pels (2000, p. 29 ff) and Pels, Nijkamp and Rietveld (2001; 2003b) as both methods were applied to European airports. Gillen and Lall (1997) applied data envelopment analysis to US airports.

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Results from stochastic frontier analysis were also published in an article (Pels, Nijkamp, & Rietveld, 2003b).

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number of passengers, but rather weak when considering aircraft movements. Using data envelopment analysis (Pels, 2000)240, results were similar. However, there could be observed two exceptions: The relation between airport size measured in aircraft movements and returns to scale seemed to be much stronger. Moreover, some large airports even operate under decreasing returns to scale (in passengers). This would mean that there may exist some kind of optimal size of airport in economic terms but as yet the evidence is far from conclusive.

6.1.3. Indivisibilities arising from infrastructure characteristics