Effects of corruption on efficiency of the European airports

The effect of corruption on airport productive efficiency is analyzed using an unbalanced panel data of major European airports from 2003 to 2009. We first compute the residual (or net) variable factor productivity using the multilateral index number method and then apply robust cluster random effects model in order to evaluate the importance of corruption. We find strong evidence that corruption has negative impacts on airport operating efficiency; and the effects depend on the ownership form of the airport. The results suggest that airports under mixed public–private ownership with private majority achieve lower levels of efficiency when located in more corrupt countries. They even operate less efficiently than fully and/or majority government owned airports in high corruption environment. We control for economic regulation, competition level and other airports’ characteristics. Our empirical results survive several robustness checks including different control variables, three alternative corruption measures: International Country Risk Guide (ICRG) corruption index, Corruption Perception Index (CPI) and Control of Corruption Index (CCI). The empirical findings have important policy implications for management and ownership structuring of airports operating in countries that suffer from higher levels of corruption.     

Developments of CO2-emissions and costs for small electric and combustion engine vehicles in Germany

Electric vehicles have the potential to lower emissions in the mobility sector, but especially high costs might hinder their market development. This paper aims to access environmental and economic impacts and potentials by comparing CO₂-emissions and costs of small vehicles. Considering actual data it is analysed, if and under which conditions electric vehicles are financially competitive for private consumers and under which conditions emissions can be saved. For this, a multiple-stage approach is focusing on (1) emissions during production and operation, (2) private costs and (3) external costs of emissions. A model of total cost of ownership is applied for the analysis of private and external costs.Results show that emissions of electric vehicles exceed emissions of combustion engine vehicles in the production phase, but electric vehicles cause fewer emissions during operation. Total emissions can be saved by electric vehicles even with low annual driving distances (2500–5500 km/a today). Results highly depend on the form of electricity production.Today, private costs of electric vehicles exceed the costs of combustion engine vehicles. Due to cost decreases electric vehicles can gain financial advantages in the future. External costs are high, especially for combustion engine vehicles (up to 15% of private costs), but in none of the considered cases high enough to give electric vehicles a financial advantage today. This picture will change in the future.     

A new era for airport regulators through capacity investments

Private and public airports’ optimal actions may not coincide. While private airports usually pursue profit maximization, publicly owned airports look for maximum social welfare. Thus, the prices charged by private airports may differ from the socially optimal charges and public intervention may be needed. In this paper, we analyze airport charges when an increase in frequency produces positive or negative externalities and carriers have market power. We use the methodology of game theory to show that there may exist a level of capacity for which private and social objectives coincide, so no price regulation is needed. Thus, the usual role of regulators and planners could be modified in order to decide the appropriate capacity investments for which airport regulation is no longer necessary.     

On the relationship between airport pricing models

Airport pricing papers can be divided into two approaches. In the traditional approach the demand for airport services depends on airport charges and on congestion costs of both passengers and airlines; the airline market is not formally modeled. In the vertical-structure approach instead, airports provide an input for an airline oligopoly and it is the equilibrium of this downstream market which determines the airports’ demand. We prove, analytically, that the traditional approach to airport pricing is valid if air carriers have no market power, i.e. airlines are atomistic or they behave as price takers (perfect competition) and have constant marginal operational costs. When carriers have market power, this approach may result in a surplus measure that falls short of giving a true measure of social surplus. Furthermore, its use prescribes a traffic level that is, for given capacity, smaller than the socially optimal level. When carriers have market power and consequently both airports and airlines behave strategically, a vertical-structure approach appears a more reasonable approach to airport pricing issues.     

The impact of competition on container port (in)efficiency

There are many studies on container port efficiency and that seek to understand what factors, such as technical and scale efficiency, private versus public terminal management or macro-economic factors, play on the efficiency score of a given port. There are fewer studies that focus on the role played by the inter-port competitive environment. This role remains difficult to assess. In fact, on the one hand, a port subject to high inter-port competition may record higher efficiency scores due to the pressure from the competitive environment. On the other hand, a port subject to high competition may be forced to over-invest and could therefore records a lower efficiency score. This article investigates this issue and examines how the degree of competition measured at different levels (local, regional and global level) impacts the efficiency score of a given container port. To do so, we implement a truncated regression with a parametric bootstrapping model. The model applied to information gathered for 200 container ports in 2007 and 2010 leads to the following conclusions: port efficiency decreases with competition intensity when measured in a range of 400–800 km (regional level); and the effect from competition is not significant when competition is measured at a local (less than 300 km) or at a global (more than 800 km) level. Estimates also show a tendency for ports who invested from 2007 to 2010 to experience a general decrease in efficiency scores, an element which could be explained by the time lag between the investment and the subsequent potential increase in container throughput.     

Intercontinental-airport regulation

This paper analyzes strategic interaction between intercontinental airport regulators, each of which levies airport charges paid by airlines and chooses its airport capacity under conditions of congestion. Congestion from intercontinental flights is common across intercontinental airports since departure and arrival airports are linked one to one, while purely domestic traffic also uses each airport. The paper focuses on two questions. First, if both continents can strategically set separate airport charges for domestic and intercontinental flights, how will the outcome differ from the first-best solution? Second, how is strategic airport behavior affected by the extent of market power of the airlines serving the intercontinental market? We see that strategic airport pricing and capacity choices by regulators lead to a welfare loss: the regulators both behave as monopolists in the market for intercontinental flights, charging a mark-up and decreasing capacity. This welfare loss even overshadows possible negative effects from imperfect competition within the intercontinental airline market. We further discuss how the presence of multiple regulators on one continent or a simple pricing rule might constrain the welfare loss created by strategic airport regulation.     

Airport privatization in congested hub–spoke networks

This paper investigates the airport privatization issue. One congested hub and two linked local airports serve symmetric hub carriers. Passengers valuate the congestion delay cost and benefit from greater frequencies. The government considers privatizing either the hub or local airports. We find that in each privatizing scenario, welfare-maximizing public airport(s) set a charge below their operating costs in order to fully coordinate the high charge of privatized airport(s). If this fiscal deficit is not allowed, each scenario causes distortion. Interestingly, the distortion—and hence welfare losses—in privatizing a hub are smaller (larger) than those in privatizing both local airports when both passengers’ valuations are small (large); this is exactly the case when privatized local airports are strategic substitutes (complements). We also surprisingly find that retaining the hub airport as public and privatizing one or both local airports achieves the same market outcomes. We further find that if all airports are privatized, welfare becomes worse than the other scenarios; the hub airport charges lower (higher) prices than local airports when both local airports are strategic substitutes (complements).     

Demonstration of reduced airport congestion through pushback rate control

Airport surface congestion results in significant increases in taxi times, fuel burn and emissions at major airports. This paper describes the field tests of a congestion control strategy at Boston Logan International Airport. The approach determines a suggested rate to meter pushbacks from the gate, in order to prevent the airport surface from entering congested states and to reduce the time that flights spend with engines on while taxiing to the runway. The field trials demonstrated that significant benefits were achievable through such a strategy: during eight four-hour tests conducted during August and September 2010, fuel use was reduced by an estimated 12,250–14,500 kg (4000–4700 US gallons), while aircraft gate pushback times were increased by an average of only 4.4 min for the 247 flights that were held at the gate.     

Electric vehicle parking in European and American context: Economic,energy and environmental analysis

The transportation sector faces increasing challenges related to energy consumption and local and global emissions profiles. Thus, alternative vehicle technologies and energy pathways are being considered in order to overturn this trend and electric mobility is considered one adequate possibility towards a more sustainable transportation sector.In this sense, this research work consisted on the development of a methodology to assess the economic feasibility of deploying EV charging stations (Park-EV) by quantifying the tradeoff between economic and energy/environmental impacts for EV parking spaces deployment. This methodology was applied to 4 different cities (Lisbon, Madrid, Minneapolis and Manhattan), by evaluating the influence of parking premium, infrastructure cost and occupancy rates on the investment Net Present Value (NPV). The main findings are that the maximization of the premium and the minimization of the equipment cost lead to higher NPV results. The NPV break-even for the cities considered is more “easily” reached for higher parking prices, namely in the case of Manhattan with the higher parking price profile. In terms of evaluating occupancy rates of the EV parking spaces, shifting from a low usage (LU) to a high usage (HU) scenario represented a reduction in the premium to obtain a NPV = 0 of approximately 14% for a 2500 € equipment cost, and, in the case of a zero equipment cost (e.g. financed by the city), a NPV = 0 was obtained with approximately a 2% reduction in the parking premium. Moreover, due to the use of electric mobility instead of the average conventional technologies, Well-to-Wheel (WTW) gains for Lisbon, Madrid, Minneapolis and Manhattan were estimated in 58%, 53%, 52% and 75% for energy consumption and 66%, 75%, 62% and 86% for CO₂ emissions, respectively.This research confirms that the success of deploying an EV charging stations infrastructure will be highly dependent on the price the user will have to pay, on the cost of the infrastructure deployed and on the adhesion of the EV users to this kind of infrastructure. These variables are not independent and, consequently, the coordination of public policies and private interest must be promoted in order to reach an optimal solution that does not result in prohibitive costs for the users.     

Competitive tendering versus performance-based negotiation in Swiss public transport

The purpose of this study is to assess differences in the levels of cost efficiency of bus lines operated under competitively tendered contracts and performance-based negotiated contracts. Following the revision of the Swiss railways act in 1996, regional public authorities were given the choice between two different contractual regimes to procure public passenger transport services. We directly compare the impact of competitive tendering and performance-based negotiation by applying a stochastic frontier analysis to the complete dataset of bus lines (n = 630) operated by the main Swiss company (Swiss Post) at the same time (in 2009) throughout the country. The overall results show that the differences in the levels of cost efficiency between the two contractual regimes are not significant. Our findings are in line with recent evidence of cost convergence between competitive tendering and performance-based negotiation, and suggest that the practice of using both contractual regimes is challenging for the operators in terms of competitive pressure. The threat of competitive tendering may have a disciplining effect on negotiation since it prevents bus companies from bargaining inadequate rents and inducing asymmetric information advantages.     

Contract Design,Financing Arrangements and Public Ownership—An Assessment of the US Airport Governance Model

Abstract

US airports negotiate legally binding contracts with airlines and finance large investment projects with revenue bonds. Applying insights from transaction cost economics, we argue that the observed variation in contractual and financing arrangements at US airports corresponds to the parties' needs for safeguarding and coordination. The case evidence presented reveals that public owners set the framework for private investments and contracting. We suggest that airline contracts and capital market control result in comparative efficient investments and act as a check on the cost inefficiency typically linked to public ownership.     

Airport and airlines competition: Incentives for vertical collusion

This paper develops a model of airport and airline competition in a three-stage game. We analyse incentives for vertical collusion between one airport and one airline that compete with another airport and another airline, by means of static and dynamic games. We find that incentives for collusion exist when airports and airlines have different market sizes and, under certain conditions, also when secondary airports and low cost airlines compete with main airports and full service airlines.     

Airport demand management: The operations research and economics perspectives and potential synergies

Airport demand management aims to mitigate air traffic congestion by limiting the imbalances between demand and capacity at busy airports through administrative measures (e.g., slot controls) or economic incentives (e.g., congestion pricing, slot auctions). This paper provides an integrated synthesis of the contributions of the fields of operations research/management science (OR/MS) and economics on the subject matter. From an operating standpoint, assessing the benefits of demand management requires estimates of airport capacity and models of airport on-time performance. From a managerial standpoint, the design of demand management mechanisms can be supported by decision-making models of flight scheduling. From an economic standpoint, the welfare impact of congestion pricing, slot controls and slot auctions depends on the market structure at the airport. This paper proposes an integrated framework that underscores the interdependencies between these operating, managerial and economic aspects to foster cross-disciplinary approaches toward more effective demand management policies at busy airports worldwide.     

A forecast air pollution model applied to a hypothetical urban road pricing scheme: An empirical study in Madrid

Reducing the air pollution from increases in traffic congestion in large cities and their surroundings is an important problem that requires changes in travel behavior. Road pricing is an effective tool for reducing air pollution, as reflected currently urban road pricing outcomes (Singapore, London, Stockholm and Milan). A survey was conducted based on establishing a hypothetical urban road pricing system in Madrid (a random sample size n = 1298). We developed a forecast air pollution model with time series analysis to evaluate the consequences of possible air pollution decreases in Madrid. Results reveal that the hypothetical road pricing for Madrid could have highly significant effects on decreasing air pollution outside of the city and in the inner city during the peak operating time periods of maximum congestion (morning peak hours from 7:00 to 10:00 and evening peak hours from 18:00 to 20:00). Furthermore, this system could have significant positive effects on a shift toward using public transport and non-motorized modes inside the hypothetical toll zone. This reveals that the system has a high capacity to motivate a decrease in air pollution and impose more sustainable behavior for public transport users.     

Integrated analysis of GHGs and public health damage mitigation for developing urban road transportation strategies

This study attempts to present an urban road transportation strategy focusing on the mitigation of both GHGs emission and public health damage, taking Xiamen City as a case study. We developed a Public Health and GHGs Emission model to estimate the impacts of direct energy-consumption-related GHGs emissions and public health damage in Xiamen’s road transportation strategies from 2008 to 2025, considering the environmental benefits and economic costs. Two scenarios were designed to describe future transportation strategies for Xiamen City, and mitigation potentials for both GHGs emission and public health costs were estimated from 2008 to 2025 under a series of options. The results show that enacting controls on private vehicles would be most effective to GHGs mitigation, while enacting controls on government and rental vehicles would contribute the most to NO₂ and PM2.5 reductions. Compared with the Business as Usual scenario, the Integrated scenario would achieve about a 68% energy consumption reduction and save 0.23 billion yuan (95% CI: 0.16, 0.32) in health costs in 2025. It is clear that integrated and advisable strategies need to mitigate the adverse impacts of urban road vehicles on GHGs emissions and public health and economic costs, particularly in regions of rapid urbanization.     

Vehicle restrictions and CO2 emissions in Beijing – A simple projection using available data

The Beijing Government launched a new policy on restricting vehicle ownership in late 2010 to regulate the faster motorization and the excessive vehicular carbon dioxide (CO₂) emissions. In this paper, we first analyzed this policy and its effect on private passenger vehicle population. The private passenger vehicle population in Beijing from 2011 to 2020 was predicted under three different scenarios: no constraint (NC), current constraint (CC) and tighter constraint (TC). Then the assessment of vehicular emissions reduction benefits was made on the basis of private passenger vehicle population, vehicle kilometers traveled and CO₂ emission factors. It was projected that the CO₂ emissions in 2020 will reach 23.90, 15.55 and 13.23 million tons under NC, CC and TC respectively. The policy is very effective in controlling the faster motorization and reducing CO₂ emissions.     

Productive efficiency and ownership of urban bus services

The established ownership mix of urban bus operations in Australia provides a unique opportunity to investigate the productivity differences between public and private bus service supply. Using duality theory in economics which links economic indices of factor productivity to the cost structure of a firm, we develop empirical measures of total and partial productivity of inputs, and adjust the differences for the effects of ownership status and operating environment. The evidence supports the notion that private supply of public passenger transport in general has performed more efficiently in the past than public supply, although the differences in productivity need not continue in the future.     

Using DEA models to jointly estimate service quality perception and profitability – Evidence from international airports

With increasing competition between airports and a growing share of non-aeronautical revenues, particularly at large international hubs, perceived quality and consumer satisfaction have not only become a key focus of management but potentially the most important tool to achieve or maintain a competitive advantage. However, in the long run stakeholders aim for profit maximisation and it has been shown for other parts of the aviation supply chain that quality does significantly impact on profitability. In this paper we aim to investigate whether perceived airport quality has an impact on airport profit margins. We further apply two-stage Data Envelopment Analysis (DEA) models to estimate a single efficiency measure that combines the potentially conflicting indicators of perceived service quality and profitability for the airport context. We also identify determinants of the jointly estimated single quality/profitability measure.     

How much noise reduction at airports?

Airport noise nuisance is a negative externality especially when it occurring near urban areas. Like all externalities, noise nuisance may be a reason for government intervention. When intervening, governments should set quantitative policy targets with care. In practice, this issue is generally neglected. This line of research sets the first step towards determining optimal policy targets in the case of noise nuisance near airports, more specifically in the case of Amsterdam Airport. We use hedonic pricing to establish the benefits of noise reduction. Furthermore, we develop a bottom-up cost function to analyze the costs of reducing noise for airlines. We then equate marginal costs and benefits to establish the optimal level of noise reduction, which appears to be 3 dB in the case of Amsterdam Airport. Welfare increasing measures include alternative approach procedures, regional substitution of planes within existing fleets and early depreciation of noisy planes increase welfare. Reducing the number of flights has a negative effect on net welfare.     

Reactance or acceptance? Reactions towards the introduction of road pricing

We tested the opposite predictions of reactance and dissonance theory, two popular psychological theories, with regard to the responses of car drivers to the introduction of the road pricing. Reactance theory predicts that persons who are convinced that a toll will come are more opposed than less convinced persons. In contrast, dissonance theory expects that convinced persons are more in favour of road pricing than less convinced persons. Aim of the study was to test which theory is more appropriate to explain user reactions towards the toll introduction. We experimentally manipulated the perceived likelihood (low, middle, high and a control condition) of a toll introduction for private cars on German motorways (N = 140 car drivers). In accordance with the predictions of dissonance theory, results revealed clearly that convinced persons about a definite introduction of road pricing developed more positive attitudes towards road pricing than less convinced persons, i.e., the strength of conviction about the introduction of road pricing has a strong effect on the attitudinal evaluation of road pricing. The implications are discussed.