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German Airport Project German Airport Project DEVELOPING MEASURES OF AIRPORT PRODUCTIVITY AND PERFORMANCE: APPLICATION OF DATA ENVELOPE ANALYSIS Presented by ; H.Engin Duran FHW-Berlin School of Economics

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Agenda 1.DEA TUTORİAL 1.DEA TUTORİAL - Efficiency Basics - Efficiency Basics -İnput and Output Oriented Analysis -İnput and Output Oriented Analysis -The Efficiency /Profitability Matrix -The Efficiency /Profitability Matrix 2. APPLICATION OF DATA ENVELOPE ANALYSIS 2. APPLICATION OF DATA ENVELOPE ANALYSIS DEA Results including Terminal and Airside efficiency -DEA Results including Terminal and Airside efficiency -Tobit’s Regression Analysis 3.CONCLUSİONS

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1.DEA TUTORIAL Definition of DEA ( Data Envelopment Analysis): Definition of DEA ( Data Envelopment Analysis): Data envelopment analysis (DEA) is a linear programming based technique for measuring the relative performance of organisational units where the presence of multiple inputs and outputs makes comparisons difficult Data envelopment analysis (DEA) is a linear programming based technique for measuring the relative performance of organisational units where the presence of multiple inputs and outputs makes comparisons difficult

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1.DEA TUTORİAL What is efficiency? Productive efficiency refers to producing a given output by using the minimum possibleamounts of inputs, or, producing the maximum possible output using a given amount of inputs. Difficulty of efficiency measurement in multiple input and output case Difficulty of efficiency measurement in multiple input and output case

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1.DEA TUTORİAL Relative Efficiency Approach In Multiple case relative efficiency approach : In Multiple case relative efficiency approach :

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1.DEA TUTORİAL Relative Efficiency Approach

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Under these circumstances, efficiency of a target unit can be obtained as a solution to the following problem: Under these circumstances, efficiency of a target unit can be obtained as a solution to the following problem: Maximising the efficiency

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1.DEA TUTORIAL Relative Efficiency Approach DEA modal to solved lineerly DEA modal to solved lineerly

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1.DEA TUTORIAL Output Oriented Analysis Simulation of two outputs y1 and y2 and a single input e.g v1 (Y1.w1 + Y2.w2 ) / v1 = Relative efficiency Weights are to be found by solvıng the modal lineerly: Output oriented modal : Max Ho: Y1.w1 + Y2.w2 V1=100 (say) (Y1.w1 + Y2.w2) – v1 < 0

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1.DEA TUTORIAL İnput Oriented Analysis

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1.DEA TUTORIAL Input Oriented Analysis X1.V1 + X2.V2/ Y1 = Relative inefficiency X1.V1 + X2.V2/ Y1 = Relative inefficiency Weights are to be found by solvıng the modal lineerly: Input oriented modal : Min Ho: X1.V1 +X2.V2 Y1=100 (say) X1.V1 +X2.V2 – Y1 > 0 = Close to unity, higher efficiency Close to unity, higher efficiency

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1.DEA TUTORIAL Output OrientedAnalysis Output versus input oriented DEA modal; Output versus input oriented DEA modal;

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1.DEA TUTORIAL The Efficiency /Profitability Matrix

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2.APPLICATION OF DATA ENVELOPE ANALYSIS DEVELOPING MEASURES OF AIRPORT PRODUCTIVITY AND PERFORMANCE: APPLICATION OF DATA ENVELOPE ANALYSIS David Gillen & Ashish Lall

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2.APPLICATION OF DATA ENVELOPE ANALYSIS DATA AND METHODOLOGY Type of Data Type of Data Number of Airports ; (21 all from USA) Number of Airports ; (21 all from USA) Information for each airport was assembled for the period 1989-1993. 114 observations organized

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2.APPLICATION OF DATA ENVELOPE ANALYSIS DATA AND METHODOLOGY Two Types of analysis to be held; 1. 1. DEA and relative efficiency approach Terminal Efficiency Analysis Movement Efficiency Analysis 2. 2. Tobit’s Regression Analysis

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2.APPLICATION OF DATA ENVELOPE ANALYSIS 2.APPLICATION OF DATA ENVELOPE ANALYSIS DEA and relative efficiency approach Terminal Efficiency Analysis Outputs: Number of passengers, Pounds of cargo İnputs: Number of runways number of gates, terminal area, number of employees, number of baggage collection belts and number of public parking spots. Movement Efficiency Analysis Outputs:Air carrier movements, commuter movements Inputs:airport area, number of runways, runway area and number of employees

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2.APPLICATION OF DATA ENVELOPE ANALYSIS DEA Results including Terminal and Airside efficiency

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Interpretations regarding efficiency measurements; In the majority of cases the index is falling implying an increase in efficiency,basically can be explained by a reflect in part the emergence from the recession in the late 1980's. Anchorage shows an increase in inefficiency for terminals but a reduction in inefficiency for movements reduction in passengers due to long haul jets being able to bypass this technical stop The hub airports exhibit some loose similarities;As hubbing rises the terminal efficiency improves but movements efficiency decreases most likely due to the feed from small commuter aircrafts Terminals whıch are doing better reflect new and expanding hub operations,traffic and economic growth (e.g. San Diego). Those doing the same are well established hub airports.

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2.APPLICATION OF DATA ENVELOPE ANALYSIS 2.APPLICATION OF DATA ENVELOPE ANALYSIS Tobit’s Regression Analysis Methodology;Set of Data; Methodology;Set of Data; 4 set of Data is used; 4 set of Data is used; İndependent variables; İndependent variables; dummy variables for the time period, dummy variables for hub airports,noise strategy variables and management operational and investment variables. Dependent Variables;Log of efficiency Index of movements,close to zero means more efficient.

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2.APPLICATION OF DATA ENVELOPE ANALYSIS 2.APPLICATION OF DATA ENVELOPE ANALYSIS Tobit’s Regression Analysis

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Results and Interpretations regarding Tobit’s Regression for Movements: Results and Interpretations regarding Tobit’s Regression for Movements: The time dummies are not significant so there is no apparent trend in the data or anomalies in one year or another The hub dummies show clearly that primary hubs increase the efficient use of the airside.The former hubs have a large number of feeder flights hence increasing the level of efficiency Using a preferential flight path or limiting the hours of operation reduces inefficiency while all the remaining noise management strategies tend to increase inefficiency.

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2.APPLICATION OF DATA ENVELOPE ANALYSIS 2.APPLICATION OF DATA ENVELOPE ANALYSIS Tobit’s Regression Analysis Results and Interpretations regarding Tobit’s Regression for Movements: Results and Interpretations regarding Tobit’s Regression for Movements: Limiting the hours an airport leads reducing inefficiency due to given limitations utilizes efficiency of airports,Increasing the number of boarding gates can increase airside efficiency while increasing the number of runways has no impact Financing strategy of airport leads to change in efficiency. Airports that have residual financing have a higher level of efficiency. Under residual financing the airlines are at risk for revenue shortfalls, thıs brings pressure to bear on the airport to ensure greater efficiency on the airside. The preferred noise management strategy is to in fact limit operating hours and to use preferential flight paths would increase efficiency

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2.APPLICATION OF DATA ENVELOPE ANALYSIS 2.APPLICATION OF DATA ENVELOPE ANALYSIS Tobit’s Regression Analysis

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Results and Interpretations regarding Tobit’s Regression for terminal: Results and Interpretations regarding Tobit’s Regression for terminal: Terminals at airports that are hubs operate at a higher level of efficiency than non-hubs. The way in which gates are managed has an impact on efficiency. The greater the proportion of common and exclusive use gates the greater the reduction in inefficiency.In Common use of gates airports playing major role and take care for maximising efficiency at the mean time İn exclusive use of gates carriers do take care about efficiency As the proportion of preferential use gates rises we get the opposite result; efficiency falls. A carrier which has preferential treatment may try to use gates as a barrier to entry and not necessarily use them efficiently

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2.APPLICATION OF DATA ENVELOPE ANALYSIS 2.APPLICATION OF DATA ENVELOPE ANALYSIS Tobit’s Regression Analysis Results and Interpretations regarding Tobit’s Regression for terminal: Results and Interpretations regarding Tobit’s Regression for terminal: Having greater proportions of international passengers is one strategy which has a marked impact on improving terminal efficiency. Adding gates is also effective but how one manages those gates is also important Bigger terminals are not the solution to improving efficiency but allowing greater access to aircraft and passengers with greater numbers of gates will.

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Conclusion In the majority of cases the index is falling implying an increase in efficiency (or reduction in inefficiency). This can reflect in part the emergence from the recession in the late 1980's. The best thing airport management is to improve efficiency is create pressures of productive and dynamic efficiency through corportization or privatization: 'residual financing' variable.

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Conclusion The productivity improvement is a combination of external market forces as well as internal firm reorganization and changing management incentives - intra-firm market forces Most important items ; Airside Efficiency Having hubs, Expanding Gate Capacity Expanding Gate Capacity Market Discipline Market Discipline Movement Efficiency Expanding number of gates in forms of common or exclusive but not preferantial

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Conclusion Is Carrying out such similar project possible for German Airports ? Is Carrying out such similar project possible for German Airports ? -Possible but difficulties exist; -Possible but difficulties exist; Low number of international Airports Low number of international Airports Lack of sufficient useful data Lack of sufficient useful data

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Thank you !

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