The Relative Efficiency of Germ an and British Airports An - - PowerPoint PPT Presentation

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The Relative Efficiency of Germ an and British Airports An - - PowerPoint PPT Presentation

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The Relative Efficiency of Germ an and British Airports An Application of Partial Factor Methodology and Data Envelopm ent Analysis Presented by: Gerry Abdesaken Berlin School of Economics Wenjuan Chen Humboldt University Berlin Astrid

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Supported by

The Relative Efficiency of Germ an and British Airports

An Application of Partial Factor Methodology and Data Envelopm ent Analysis

Presented by: Gerry Abdesaken

Berlin School of Economics

Wenjuan Chen

Humboldt University Berlin

Astrid Cullman

German Institute for Economic Research (DIW Berlin) INFRADAY Berlin October 7, 2006

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INFRADAY Berlin – October 7, 2006 2

Introduction Productivity analysis of German and British airports using partial productivity methodology

Ratio analysis depicting capital, labor and financial performance Sample: 18 German international airports from 1998-2004 and 14 British international airports from fiscal years 1995-2005

Data Envelopment Analysis as a verification method (in progress)

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INFRADAY Berlin – October 7, 2006 3

Methodology

Source: von Hirschhausen (2005)

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INFRADAY Berlin – October 7, 2006 4

Methodology: Partial Indicators

Area of Measurement Indicator

Financial Performance Real Costs per WLU Real Revenues per WLU Real Aeronautical Revenues per WLU Real Commercial Revenues per WLU Aeronautical/Total Revenue (%) Revenue/Expenses Ratio Terminal Capacity PAX(000) per Gate PAX per M2 (Terminal Side) Runway Capacity Movements(000) per Runway Labor Productivity PAX per Employee Movements per Employee WLU(000) per Employee Capital Productivity

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INFRADAY Berlin – October 7, 2006 5

Methodology: Partial Indicators e.g. PAX per Employee Advantages

Can derive simple comparisons between separate input and output factors Provide for comparisons in specific areas Ease of computation

Disadvantages

Comparisons could be invalid when comparing

  • bservations that have different input mixes

Do not take into account factor prices Cannot handle multiple outputs and inputs

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INFRADAY Berlin – October 7, 2006 6

Methodology: Criticisms of Partial Indicators

Labor productivity indicators at Berlin Airport Tegel are extremely high in comparison to other German int’l airports

PAX per Employee 1998, 2001, 2004

5000 10000 15000 20000 25000 SXF BRE DTM DUS FRA HAM MUC NUE STR CGN LEJ DRS ERF HAJ FMO TXL THF SCN PAX 1998 2001 2004

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INFRADAY Berlin – October 7, 2006 7

Methodology: Criticisms of Partial Indicators

ATM per Employee 1998-2004: Germany vs UK

0,0 50,0 100,0 150,0 200,0 250,0 300,0 1998 1999 2000 2001 2002 2003 2004 UK Germany

Degree of vertical integration is imperative in regards to labor productivity comparability

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INFRADAY Berlin – October 7, 2006 8

Methodology: DEA Non-parametric statistical method which provides overall relative efficiency scores through formulation of efficient frontier Advantages

Multiple inputs and outputs Overall efficiency measurement to verify partial productivity indicators

Disadvantages

Depicts firm inefficiencies, but does not explain why

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INFRADAY Berlin – October 7, 2006 9

Data Set Usage of Panel Data from 1998 to 2004 Financial Data:

Published data from financial reports Sample = 9 German airports (Aggregated data from Berlin and Fraport), 14 British airports

Capacity Data:

Sample = 18 German Airports, Capacity data for British airports still being ascertained

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INFRADAY Berlin – October 7, 2006 10

Financial Performance 1999 – 2004 Germany and the UK

  • 10%
  • 8%
  • 6%
  • 4%
  • 2%

0% 2% 4% 1999 2000 2001 2002 2003 2004

% Annual Growth in Revenue per WLU based on 1998

% Annual Growth based on 1998 UK % Annual Growth based on 1998 Germany

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INFRADAY Berlin – October 7, 2006 11

Financial Performance 1999 – 2004 Germany and the UK

Revenue Expense Ratio 1998-2004: Germany vs UK

1,00 1,05 1,10 1,15 1,20 1,25 1,30 1,35 1,40 1,45 1,50 1998 1999 2000 2001 2002 2003 2004 UK Germany

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INFRADAY Berlin – October 7, 2006 12

Financial Performance 1999 – 2004 Germany and the UK

% Annual Growth in Costs per WLU

  • 10,0%
  • 5,0%

0,0% 5,0% 10,0% 15,0% 1999 2000 2001 2002 2003 2004 Annual Growth based on 1998 UK Annual Growth based on 1998 Germany

Cost efficiency has been improving for both groups of airports

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INFRADAY Berlin – October 7, 2006 13

Average Performance - Germany

FY 1998 FY 2004 4,76 5,11 17,61 € 19,51 € 19,85 € 18,67 € 12,78 € 11,28 € 6,07 € 5,64 € 63,85% 60,50% 1,16 1,06 4279,23 5000,34 113,58 93,51 65,48 63,58 257,50 201,95 110,04 90,44 PAX per Employee WLU per Employee Real Costs per WLU Real Revenues per WLU Real Aeronautical Revenues per WLU Real Commercial Revenues per WLU Aeronautical/Total Revenue (%) Rev:Ex Ratio Indicator Average Performance of German Airports 98-04 PAX/ SqM (Terminal Side) Movements per Employee Movements (000)/ Runway PAX(000) per Gate

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INFRADAY Berlin – October 7, 2006 14

Average Performance (Capacity) Germany

Comparative Average Productivity of German Airports 1998-2004

0,60 0,70 0,80 0,90 1,00 1,10 1,20

1998 1999 2000 2001 2002 2003 2004

Performance Index (1998=1) WLU per Employee PAX per Employee Movements/ Employee Movements (000)/ Runway PAX(000) per Gate PAX per SqM (Terminal Side)

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INFRADAY Berlin – October 7, 2006 15

Average Productivity by Size Germany

Small* Other 4,10 5,24 4158,78 5175,09 127,31 84,73 33,02 95,77 173,07 260,46 78,07 116,47 * Small < 3.000.000 PAX in 2001 PAX per SqM (Terminal Side) Movements per Employee Movements(000) per Runway PAX(000) per Gate Average Productivity of German Airports by Size 1998-2004 Indicator WLU(000) per Employee PAX per Employee

What is the reason for ATM labor efficiency discrepancy?

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INFRADAY Berlin – October 7, 2006 16

Financial Performance

Growth in Real Revenues per WLU for German Airports from 1998 to 2004

  • 4,00%
  • 3,00%
  • 2,00%
  • 1,00%

0,00% 1,00% 2,00% 3,00% Berlin Düsseldorf Hamburg München Dortmund Bremen Stuttgart Nürnberg Frankfurt CAGR

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INFRADAY Berlin – October 7, 2006 17

Commercial Performance 1998-2004

Real Non-Aeronautical Revenues per WLU in 1998, 2001, 2004

2 4 6 8 10 12 14 Berlin Bremen Dortmund Düsseldorf Frankfurt Hamburg München Nürnberg Stuttgart Euro 1998 2001 2004

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INFRADAY Berlin – October 7, 2006 18

Labor Productivity

Movements per Employee for German Airports in 1998, 2001, 2004

0,00 50,00 100,00 150,00 200,00 250,00 300,00 350,00 400,00 450,00 SXF BRE DTM DUS FRA HAM MUC NUE STR CGN LEJ DRS ERF HAJ FMO TXL THF SCN 1998 2001 2004

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INFRADAY Berlin – October 7, 2006 19

Capital Productivity: Runway Capacity

Movements(000) per Runway for German Airports in 1998, 2001, 2004

0,00 50,00 100,00 150,00 200,00 250,00 B R E C G N D R S D T M D U S F M O F R A H A J H A M L E J M U C N U E S C N S T R S X F T H F T X L Movements(000) 1998 2001 2004

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INFRADAY Berlin – October 7, 2006 20

Capital Productivity: Terminal Capacity

PAX per SqM (Terminal Side) for German Airports in 1998, 2001, 2004

0,00 50,00 100,00 150,00 200,00 250,00 300,00 350,00 400,00 450,00 SXF BRE DTM DUS FRA HAM MUC NUE STR CGN LEJ DRS HAJ FMO TXL THF SCN PAX 1998 2001 2004

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INFRADAY Berlin – October 7, 2006 21

Financial Performance: British Airports

Percentage of aeronautical profits( U.K.) 54,00 56,00 58,00 60,00 62,00 64,00 66,00 1 9 9 5 / 4 1 9 9 6 / 5 1 9 9 7 / 6 1 9 9 8 / 7 1 9 9 9 / 8 2 / 9 9 2 1 / 2 2 / 1 2 3 / 2 2 4 / 3 2 5 / 4

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INFRADAY Berlin – October 7, 2006 22

Financial Performance: British Airports

Aeronautical Revenue per WLU

6,60 6,80 7,00 7,20 7,40 7,60 1 9 9 5 / 4 1 9 9 6 / 5 1 9 9 7 / 6 1 9 9 8 / 7 1 9 9 9 / 8 2 / 9 9 2 1 / 2 2 / 1 2 3 / 2 2 4 / 3 2 5 / 4

Commercial Revenue per WLU

3,00 3,50 4,00 4,50 5,00 5,50 1 9 9 5 / 4 1 9 9 6 / 5 1 9 9 7 / 6 1 9 9 8 / 7 1 9 9 9 / 8 2 / 9 9 2 1 / 2 2 / 1 2 3 / 2 2 4 / 3 2 5 / 4

An individualized comparison of revenue structure shows a substantial improvement in average commercial performance

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INFRADAY Berlin – October 7, 2006 23

Financial Performance: British Airports

Total costs per WLU

6,00 7,00 8,00 9,00 10,00 11,00 1 9 9 5 / 4 1 9 9 6 / 5 1 9 9 7 / 6 1 9 9 8 / 7 1 9 9 9 / 8 2 / 9 9 2 1 / 2 2 / 1 2 3 / 2 2 4 / 3 2 5 / 4 Total Revenue per WLU

10,60 10,80 11,00 11,20 11,40 11,60 11,80 12,00 1995/4 1996/5 1997/6 1998/7 1999/8 2000/99 2001/00 2002/1 2003/2 2004/3 2005/4

Revenue efficiency decreased sharply after 2001, while cost efficiency remained fairly stagnant (slight decrease)

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INFRADAY Berlin – October 7, 2006 24

DEA Models Estimated

Analysis of two separate classes of services – Terminal Services and Movements (Gillen and Lall, 1997) DEA currently only estimated for German airports

Model 1a: Terminal Services Model 1b: Air traffic movements Outputs: Total PAX, Air freight (approx. by WLU) Inputs:

  • No. of runways
  • No. of gates

Terminal Area (in m2)

  • No. of employees
  • No. of baggage collection belts
  • No. of public parking spots

Outputs: Air traffic movements Inputs: Airport area (in m2)

  • No. of runways

Runway area (approx. by length

  • f runway)
  • No. of employees
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INFRADAY Berlin – October 7, 2006 25

DEA Model 1a: Terminal Services

Efficiency for terminal services increased at BRE, LEJ, NUE, SXF, and TXL FRA, DUS, TXL and MUC are (relatively) efficient

DEA Model 1a (Pooled Regression)

0,00 0,10 0,20 0,30 0,40 0,50 0,60 0,70 0,80 0,90 1,00 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97 101 105 109 113 117 airports Technical efficiency scores

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INFRADAY Berlin – October 7, 2006 26

DEA Model 1b: Aircraft Movements

Only MUC and TXL have shown significant decreases in inefficiencies from 1998 to 2004 MUC and STR are highly efficient in the German sample set

DEA Model 1b (Pooled regression)

0,00 0,10 0,20 0,30 0,40 0,50 0,60 0,70 0,80 0,90 1,00 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101 106 111 116 airports Technical Efficiency Scores

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INFRADAY Berlin – October 7, 2006 27

Conclusion

Initial results indicate that British airports perform significantly better than German airports Non-aeronautical operations have been of increased importance for both British and German markets Revenue efficiency has diminished in both markets, but cost efficiency has also

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INFRADAY Berlin – October 7, 2006 28

Agenda for Further Research

Disaggregated financial data

To make fair comparisons and correct adjustments

Further development in the international comparison Correlation analysis between partial indicators and DEA Estimation of a DEA model which includes financial information

Aeronautical revenues as an output or operating costs as an input

Application of different methodologies