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Reform and efficiency of New Zealand's airports
Utilities Policy 36 (2015) 1e9
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Reform and efficiency of New Zealand's airports Malcolm Abbott Swinburne University of Technology, Melbourne, Australia
a r t i c l e i n f o
a b s t r a c t
Article history: Received 29 March 2015 Received in revised form 12 May 2015 Accepted 12 May 2015 Available online xxx
The paper analyses the efficiency performance of New Zealand's airports in the context of structural reform. This study is in two parts using two separate databases. In the first part a Malmquist Data Envelopment Analysis approach is used to estimate the productivity change over the longer term of the country's three largest airports between 1991/92 and 2011/12. Partial productivity indicators are used to supplement and reinforce this analysis. In the second part, a separate database is used with Data Envelopment Analysis in a two-stage process to determine the impact of scale economies and ownership type on levels of efficiency. The first part of the study found that the efficiency and productivity of the three airports improved over the years, although this was influenced to some degree by locational factors. The second part of the study found that the larger airports were more efficient than the smaller ones, and jointly owned airports are somewhat less efficient. Productivity gains appear to enable airport expansion, rather than price reductions. © 2015 Elsevier Ltd. All rights reserved.
Keywords: Airports Efficiency Productivity Performance
1. Introduction During the past three decades, the manner in which governments run state-owned enterprises in many countries has transformed. In particular, change has involved both the “corporatisation” and the “privatisation” of many businesses. Since the early 1980s, governments in over 190 countries have sold state-owned assets, raising $2 trillion in the process (Megginson, 2010; Megginson and Netter, 2001). Governments in corporatising and privatising state-owned assets have been motivated by a number of factors, although one of the most important ones has been the growing view that reformed companies are more efficient. A range of studies have shown that privately-owned firms tend to have greater levels of efficiency, and profitability than government-owned ones (Megginson and Netter, 2001; Pollitt, 1999). With airports, there has been a trend toward privatisation, although government ownership is still common in North America, Europe, and Asia. Notable government sales of airports have occurred in countries such as the United Kingdom, Austria, Denmark, Japan, Germany, Hungary, Australia and New Zealand (Andrew and Dochia, 2006; Oum et al., 2006). In the case of the privatised airports, the evidence on their relative efficiency compared to state-owned ones is mixed. The aviation industry plays an important role in the development of the New Zealand economy. In the year 2013, some 2.7
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million tourists visited New Zealand (mostly by aeroplane), with the tourism industry generating NZ$ 11.1 billion, or 16.1 per cent of the country's export income (Statistics New Zealand, Tourism satellite account). In 2014 New Zealand had 38 airports or aerodromes with scheduled air services. Of these, seven airports have international airline services and fourteen are large enough to require managed air traffic, which is conducted by the state-owned enterprise; Airways New Zealand. Those New Zealand airports with regular passenger services, and managed air traffic, have a considerable range in size. The largest is Auckland Airport, with around 156,000 aircraft movements per year and the smallest is Gisborne, with around 20,000 per annum (Airways New Zealand, Statistics). In addition there is a range of smaller scale airports whose air traffic is not managed by Airways New Zealand and for which no publically available data on air traffic are available. Table 1 provides some descriptive details about a range of New Zealand's airports. As well as differing in size, New Zealand's airports have some variety in terms of ownership. They can be divided into three types. The first type consists of those like Auckland and Wellington airports, which are predominantly owned by private investors (with a smaller share owned by local councils); the second consists of those like Hawke's Bay and Hamilton, which are owned by a combination of different government authorities (none controlling); and the last consists of those like Christchurch, which are owned largely by a single local government authority (with perhaps a minority shareholder). Policy makers in New Zealand have tried to introduce
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Table 1 Airports with scheduled airline services in New Zealand, with air traffic managed by Airways New Zealand. Airport IATA Code
History
Airline services
Owned by
Aircraft movement 2010/11 2011/12
Return on assets 2010/11 2011/12
Auckland Airport AKL
Opened 1965& operated by the Auckland Regional Authority. Funded by local and NZ government funds. Corporatised 1988.Privatised government share 1998. Opened 1958. Funded by local and NZ Government funds. Corportised 1988. Privatised government share 1998. Opened 1940. Owned and operated by local council. Corporatised 1988.
Full International
Private 78% Auckland Council 22%
156,484 155,903
10.2% 10.9%
Limited International
67% Infratil 33% Wellington City Council
105,585 102,454
3.8% 3.5%
Full International
75% Christchurch City Holdings Ltd NZ Government 25%
121,112 108,757
4.0% 3.3%
Opened 1962. Operated as joint venture between local council & NZ Government. Corporatised 1988. Opened 1935. Owned and operated by local government authorities. Corporatised in 1989.
Limited International Limited International
29,229 25,328 110,419 128,744
0.6% 2.7% 1.1% 1.5%
Opened 1939. Joint venture from 1958 between local council & NZ Government. Corporatised 1994. Opened 1940. Owned by local government authority. Since 2004 operated by the Eastland Group. Opened 1963. Operated by joint venture of local councils & NZ Government. Corporatised 2009. Opened 1933. Owned & operated by joint venture between local council & NZ Government. Became a council controlled organisation. Opened 1963. Originally a joint venture between local council & NZ Government, later taken over by the local government and corporatised in 1990. Opened in 1958. Founded by City Council. Became Joint venture between city council and NZ Government in 1958. Corporatised 1989. Local council owned and operated. Corporatised.1998
Domestic only
NZ Government 50% Dunedin City Council 50% Council (50%), Waipa (15.625%), Waikato (15.625%), Matamata-Piako (15.625%) and Otorohanga District Councils (3.125%). NZ Government 45% Invercargill City Council 55% Owned by Eastland Community Trust Gisborne District Council 100% NZ Government 50%, Napier 25%, Hastings 25%. New Plymouth District Council 50% NZ Government 50%
30,840 28,491 22,459 19,594 27,332 25,242 32,791 30,773
3.3% na na na 6.0% Na 0.2% 0.6%
Wellington International Airport WLG Christchurch International Airport CHC Dunedin International Airport DUD Hamilton International Airport HLZ Invercargill Airport IVC Gisborne Airport GIS Hawkes Bay Airport NPE New Plymouth Airport NPL Rotorua International Airport ROT Palmerston North International Airport PMP Nelson Airport NSN Marlborough Airport BHE Queenstown Airport ZQN
Opened 1939. Local council owned and operated. Corporatised. Opened 1951. Local council owned & operated. Corporatised. 1989. Auckland airport bought 25% share 2010
Domestic only Domestic only Domestic only
Limited International
Roturoa District Council 100%
22,682 22,092
6.2% 2.1%
Limited International
Palmerston North City Council 86.5%, Central Avion Holdings Ltd 13.5%
65,708 67,395
2.7% 2.6%
Domestic only Domestic only
Nelson City Council 50% Tasman District Council 50% Marlborough District Council 100%
Limited International
Queenstown Lakes District Council 75% Auckland Airport 25$
50,094 48,073 23,660 22,689 41,769 43,776
20.2% 22.3% 0.9% 7.5% 6.7% 7.6%
Source: Annual reports.
reforms that raise the level of efficiency and productivity of stateowned enterprises. Given differences in their scale and ownership structures it is possible to not only look at how productivity changes over time, but also possible to see if there is a link between scale and ownership structure on the one hand and efficiency performance on the other. In looking at the efficiency of the airports in New Zealand this study uses Data Envelopment Analysis (DEA) and partial productivity indicators to analyse two separate sets of data. In the first part of this study a Malmquist DEA approach is used to determine the change in productivity of New Zealand's three major airports over the longer term (1992e2012). Partial productivity indicators are also used. In the second, part a two-stage methodology was applied to a wider range of airports (over a shorter period). DEA was used to determine relative levels of efficiency of airports in the sample and second-stage regression was then used to determine if there is any link between efficiency levels and scale and ownership type. In the following section of this paper, a description of the background of the reform to the main airports in New Zealand is given. Next is a literature review and description of the methodology used. This is followed by an analysis of their performance during this period and, in the final section, some conclusions are made.
2. New Zealand's airports In order to understand the nature of the structure of the airport industry in New Zealand, it is necessary to know some background. Aviation is reputed to have begun in New Zealand on the 31 March 1903 when Richard Pearse flew the first heavier-than-air machine (Ogilvie, 2003). Interest in aviation was enthusiastic in New Zealand before the First World War, but it was only after the War that many of the country's aerodromes were built. At this time, aerodrome development was funded mainly by local government authorities and private clubs (Ross, 1955). The central government became involved and the first regulated activity in the industry came with the passage of the Aviation Act (1918), which provided for the issuing of certificates of proficiency to pilots, licensed flying schools, and prescribed areas for navigation. In 1920 a nine member Air Board was established to act in an advisory capacity to the Government. Later, the Air Navigation Act 1931 enabled the Government to meet international regulations and the Transport Licensing (Commercial Aircraft Services) Act (1934) laid down conditions that applicants had to meet in order to gain a license to start an air-services business. To administer these requirements, the Air Department was established in 1937; it covered both military and civil aviation until 1964 when a Department of
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Civil Aviation was created to separate oversight from military aviation. In 1968, the Civil Aviation Department became a Division of the Ministry of Transport, with responsibility for the setting and maintaining of safety standards in the aviation industry, conducting air-traffic management, and developing aviation policy (McGreal, 2003). This meant that there was some functional split between the operation of the airports (by local government authorities) and regulation and policy development (by the central government). Despite this involvement in the regulation of the industry, the New Zealand Government was not directly involved in the establishment of airports. Instead, the construction of airports was undertaken by single local government authorities or combinations thereof. The central government did, however, assist with the funding of airport expansion. In 1929, the Local Government (Aviation Encouragement) Act was passed, which provided funds and assistance to local government authorities from the Public Works Department. The central government was also involved in the funding and construction of airports during the Second World War. During the 1950s and 1960s, with the advent of larger aircraft and greater volumes of air traffic, the upgrading of the airports also proved to beyond the resources of local government. The New Zealand Government, therefore, became further involved in the development of the major airports, generally using a funding formula for airport development of 50 per cent central and 50 per cent local government. This arrangement was formally established in 1966 with the passage of the Airport Authorities Act. The consolidation of policy development, air-traffic management, and aviation regulatory functions into a single government department, however, began to be questioned in the 1980s. The first step in reform was the creation of the state-owned company, Airways Corporation of New Zealand (Airways New Zealand), which was made responsible for the managing of New Zealand's airspace. It was established in April 1987 under the State-Owned Enterprises Act 1986 (McGreal, 2003). In September 1987, a subsidiary of the Swedish Civil Aviation Authority (Swedavia AB) was appointed to investigate the industry in partnership with a New Zealand company, MacGregor & Co. The subsequent SwedaviaMcGregor Report advocated the further separation of policy and regulatory responsibilities, which led to the passage of the Civil Aviation Act 1990 (Swedavia and McGregor, 1988). This created the Civil Aviation Authority as a separate government agency on 10 August 1992 (McGreal, 2003). The Authority was responsible for establishing civil safety and security standards and managing civilian pilot, aerodrome, and aircraft licensing. Simultaneously, moves were made to establish the airports as independent, corporatised enterprises. In 1986, a legislative amendment was passed allowing local councils to form and hold shares in airport companies. This change paved the way for the creation of companies to own and operate the airports (corporatisation) and later for the sale of these shares to private interests (privatisation) (McGreal, 2003). Many of the local authorities have since undertaken this corporatisation, and today only the smallest of New Zealand's airports are still operated as part of local government authorities. At the same time as these developments in New Zealand, there was a worldwide trend towards the corporatisation of airports. Early on, the Wilson Labour Party Government in the United Kingdom created the British Airports Authority in 1966 to manage some of Britain's government-owned airports (Heathrow, Gatwick, Stansted, Prestwick, Edinburgh, and Glasgow) (Parker, 1999). In Australia, the Federal Airports Corporation was established in 1989 by the Hawke Labor Party Government to operate a number of airports in that country (Abbott and Su, 2002). In both cases, the respective national government operated a number of airports through government-owned companies, rather than breaking
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them up into individual airport companies. In New Zealand, by contrast, corporatisation of the individual airports took place on the initiative of local government authorities, which meant that they were established as separate companies. In the late 1990s, the Bolger National Party Government decided to reduce its involvement in the development and ownership of airports. In the case of two of the major airports (Auckland and Wellington), the shares owned by the New Zealand Government were sold to private investors, giving these two airports majority private ownership. In one case (Christchurch), the shares of the national government were sold to the local government authority. The reluctance on the part of local government bodies to reduce their ownership of airports has meant than many of New Zealand's smaller airports are still under government ownership. 3. Methodology and literature One way to determine levels of efficiency is to apply Data Envelopment Analysis (DEA). DEA is a non-parametric technique that uses linear programming to benchmark decision-making units in a sample against each other. Its advantage is that it can be used in circumstances where input and output prices are distorted by market power or government restrictions (Fare et al., 1985). This makes it a very useful tool in the case of airports, which are often monopolies in their own locational markets. DEA breaks down the components that drive efficiency into technical efficiency (how close a unit is to a best-practice frontier) and scale efficiency (the extent to which an organisation can take advantage of returns to scale by altering its size towards the optimal scale) (Coelli et al., 2005). DEA has been used in a number of cases to benchmark the operations of airports for a single or a number of years. Examples of these studies include those for Britain (Tolfari et al., 1990; Bazargan and Vasigh, 2003; Parker, 1999), North America (Gillen and Lall, 1997; Sarkis, 2000; Sarkis and Talluri, 2004), Spain (De la Cruz, 1999; Martin and Roman, 2001), Brazil (Pacheco and Fernandes, 2003; Fernandes and Paceco, 2005); the Baltic region (Jarzemskiene, 2012), Japan (Yoshida and Fujimoto, 2004), Europe (Pels et al., 2001, 2003), AsiaePacific (Tsui et al., 2014), worldwide (Graham and Holved, 2000; Adler and Berechman, 2001), and New Zealand (Tsui et al., 2014). For a comprehensive survey of productivity and efficiency studies of airports, see Liebert and Niemeier (2013). Tsui et al. (2014) include Auckland airport in their sample of 21 airports, finding it fairly efficient compared to the sample. Tsui et al. (2014) looked more specifically at a sample of New Zealand airports, but over a relatively short period of time (2010e2012) and without consideration of the issue of joint ownership structure as a cause of efficiency or inefficiency. Airports are simply benchmarked against each other, with the best airport in its best year being given the value of 1.0 and the airports in various other years ranked in relation to the best practice airport/year. If data are available, it is possible to benchmark the units against each other over time, therefore producing measures of change in productivity. The Malmquist DEA approach uses panel data to estimate changes in technical efficiency, technological progress (change), and total-factor productivity for a sample of like organisations. In effect, the Malmquist DEA approach derives an efficiency measure for one year relative to the prior year. The DEA Malmquist approach has been used in a number of cases to measure change in total-factor productivity of airports over time; including for Britain (Barros and Weber, 2009; Yokomi, 2005), the United States (Barros and Assef, 2009; Gillen and Lall, 2001), for Australia (Abbott and Su, 2002), Spain (Murillo-Melchor, 1999), Latin America (Pereleman and Serekinsky, 2010), Asia (Yang, 2010);
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and China (Chi-Lok and Zhang, 2009; Fung et al., 2008). Applying DEA requires a definition of airport outputs and inputs. In undertaking a study of the productivity change, it is necessary to have comparable data, over time and among the different entities analysed. In the case of New Zealand's airports this is not necessarily an easy task. Available data vary over airports and time periods, making it difficult to build a sample of like entities. This is why in this study two approaches are used. The first takes the three major airports in New Zealand to estimate Malmquist DEA productivity over the long term. These three airports are used because they are New Zealand's most important airports and similar, publically available data exist for them; this is not so true for many of the other, smaller airports in New Zealand. Past studies using DEA for airports have used various measures of outputs (such as air-traffic movements and the number of passengers and volume of cargo carried) and inputs (such as labour employed as an indicator of labour input and some combination of land, runway length, terminal space, and number of gates as indicators of capital inputs). Using air-traffic movements as an output indicator over time presents a problem due to the recent trend of using larger and fewer aircraft and aircraft movements to carry more passengers. For that reason, it is better to use both the number of aircraft movements and passengers as the indicators of output. In this study, pooled data for the three major New Zealand airports were analysed for the 21 years between 1991/92 and 2011/12. For inputs, runway length, and operating expenses (in constant dollar terms) were used (derived using the program DEAP; Coelli et al., 2005). The results are reported in the following section. As a three-airport sample is a relatively small one, partial productivity indicators were used to supplement and reinforce the findings of the DEA study. The DEA study is, therefore, illustrative rather than conclusive. Table 2 provides partial productivity labour and capital productivity figures for the three airports combined, and Figs. 4 and 5 provide partial figures using aircraft and passenger movements per runway length and real operating expenses (deflated figures) compared to aircraft and passenger movements. In the second part of this study, pooled data from thirteen airports was used.1 Data were taken between the financial years 2004/ 05 and 2011/12 for the majority of the airports (the exceptions being Hawke's Bay 2008/09e2011/12; New Plymouth 2009/10/ 11e2011/12; Rotorua 2009/10e2011/12; and Marlborough 2009/ 10e2011/12).2 In this case, the performance of the thirteen airports was benchmarked against each other for each year, rather than used for the determination of Malmquist productivity changes over time. After estimating relative efficiency, a second-stage regression approach was used to determine the relationships between efficiency and airport scale and ownership type. In order to examine these issues, Tobit regressions were estimated with the efficiency levels as the dependent variable and then separately as independent variables: size in terms of aircraft movement (S) and dummy variables for private ownership (P), joint venture ownership (J), and single-authority ownership (C).3 The results are examined in the following section. On the effects of scale and ownership on the efficiency of
1 The thirteen airports chosen all had scheduled air services and managed airtraffic control. Of the airports in New Zealand whose air traffic was managed by Airways New Zealand, two were excluded from the study Paraparaumu and Gisborne, the former being privately-owned and the later operated by a Trust. In each case a lack of publically available data caused exclusion from the study. 2 These airports were exceptions because they were corporatised as separate, reporting legal entities for shorter periods than the other in the sample. 3 It is possible that a range of other variables besides size and might affect efficiency but these lie outside of the scope of this paper.
airports, there have been a number of past studies. In terms of scale, researchers have confirmed economies of scale for airports (see for instance Assaf, 2010; Gillen and Lall, 2001; Martin-Cejas, 2002; Oum et al., 2003; Pels et al., 2001). In terms of ownership, the results are more mixed. A number of studies have found no link between ownership type and efficiency (see Assaf and Gillen, 2012; Barros and Weber, 2009; Lim and Hong, 2006; Oum et al., 2008; Parker, 1999; Pereleman and Serekinsky, 2010). A few have found that private airports are more efficient (see for instance; Oum et al., 2008; Serebrisky, 2012; Marques and Barros, 2011; Yokomi, 2005; Vogel, 2006). An interesting paper relative to this work found that mixed ownership forms were the least efficient (Oum et al., 2008). As a number of New Zealand's airports have mixed ownership forms (with different local councils and the central government owning large shares), it is possible from this sample to add shed light on this issue. 4. Efficiency and performance 4.1. General performance Before looking at productivity and efficiency measures, it is informative to look at more conventional indicators of general performance. The first indicator is that of the airports' growth in activity. Fig. 1 provides data for New Zealand's three main airports for the years between 1992/93 and 2012/13. It can be seen that growth in passenger traffic at New Zealand's three major airports exceeded that of real GDP in most years during the 1990s and 2000s. This is not true, however, of air-traffic movements, indicating that much of the growth in passenger throughput was accommodated by the airport servicing of larger capacity aircraft. Growth has been somewhat slower in the last few years of the period, mainly because of the decline in the number of tourists visiting New Zealand since the 2008 global financial crisis and because of the fall in the number of tourists visiting Christchurch since the 2011 earthquake. Fig. 2 provides a second indicator based on the earnings (before interest and tax) divided by total assets for the three airports. Because these airports are monopolies in their own jurisdictions, profit rates are generally not very good indicators of company performance. The Auckland airport, for instance, is the consistently the most profitable over the period, but as can be seen from Fig. 3, it also priced aeronautical services (as indicated by the level of real aeronautical revenue per aircraft movement) above that of the two other airports. Christchurch airport, on the other hand, priced below that of the other two airports over much of this period, which could be a result of the desire by the main shareholder (Christchurch City Council) to promote the maximum amount of business through the airport, and hence tourism business in the city. Pricing at Wellington also seems to have been affected by the privatisation of the airport. Before privatisation, average revenue per aircraft movement at Wellington was below that of the other two airports (Fig. 3); following privatisation (by the early 2000s), it was raised to comparable levels of Auckland airport. As airports tend to have some degree of market power, it is better to assess their performance in terms of productivity measures rather than rely exclusively on financial or volume indicators. 4.2. Productivity change In order to see if reform has had a beneficial effect on the performance of the three major airports, it is necessary to look at their productivity levels along with prices and profits. In looking at the productivity of the airports, both partial or total productivity measures can be observed. Table 2 provides partial labour
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Table 2 New Zealand three main airport labour and capital productivity indicators, 1991/92 to 2011/12.
1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/2000 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
Passenger numbers per staff employed
Aircraft movements per staff employed
Passengers/runway length (m)
Aircraft Movements/Runway length (m)
24,803 25,236 26,030 26,674 26,700 28,178 27,962 28,320 30,374 32,808 34,849 35,914 40,029 42,072 41,483 40,938 43,629 44,505 43,713 42,262 39,037
606 614 617 619 630 665 666 670 696 710 698 689 718 656 678 636 642 643 600 574 520
1073 1141 1824 1981 1343 1390 1385 1408 1482 1551 1578 1691 1907 2020 2.058 2092 2246 2245 2.287 2266 2304
26.2 27.7 43.3 45.9 31.7 32.8 33.0 33.3 34.0 33.6 31.6 32.4 34.2 31.5 34.1 32.9 33.5 32.9 31.8 31.2 31.1
Source: Auckland International Airport, Christchurch International Airport, Wellington International Airport, Annual reports.
(passengers and aircraft movements per staff employed) and capital productivity figures (passengers and aircraft movements per runway lengths) for the three largest airports in New Zealand. As can be seen from the table, the level of passengers per staff employed at the airports rose steadily over the period. The number of aircraft movements per staff also increased up until 2008 and then declined thereafter. Table 2 also shows that passenger numbers and aircraft movements per length of runways at the three main airports also increased up until 1995 but stagnated somewhat afterwards. This indicates that it was the accommodation of larger aircraft that drove most of the productivity improvement, rather than the movement of larger numbers of aircraft. Table 3 provides the results of the DEA Malmquist productivity and efficiency change estimates based on the first part of this study. Over the study period, Wellington achieved only a 1.3 per cent per annum increase in total-factor productivity. This compares to 1.9 per cent at Christchurch and 4.1 per cent at Auckland. The large increase for Auckland must have been at least partially due to its position as a main hub airport for New Zealand and the greater
South West Pacific region, meaning that strong growth in traffic and capacity use has probably meant high productivity growth as well. Christchurch, on the other hand, also experienced growth but it was mitigated by reductions in traffic (capacity utilization) late in the period. Figs. 4 and 5 provide partial-factor productivity levels for the years 1991/92 to 2011/12 for the three main New Zealand airports in terms of combined aircraft movements and passengers per runway length and combined real operating expenses (deflated to real values) per aircraft movements and passenger numbers. A few results can be derived from this analysis. First of all, the tendency was for the productivity of the three airports to rise steadily over the period in terms of aircraft movements per runways length (but not passengers). This is an indication of the growing use of larger planes to transport greater volumes of passengers. This is also apparent from Fig. 5, where it can be seen that there has been a fall in real operating expenses per passengers but not in terms of real operating expenses per aircraft movements (see Fig. 6). Growth in productivity since the corporatisation of the three airports has been apparent and fairly consistent across all three
Fig. 1. Annual growth of New Zealand real GDP, and aircraft movements and passenger numbers through the three main airports, 1992/93 to 2012/13, percentage. Source: Auckland International Airport, Wellington International Airport. Christchurch International Airport, Annual reports. Statistics New Zealand, National accounts.
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Fig. 2. Rate of return to three main airports; 1991/92 to 2012/13, EBIT/total assets, percentage. Source: Auckland International Airport, Wellington International Airport. Christchurch International Airport, Annual Reports.
Fig. 3. Average real aeronautical revenue per aircraft movement, three main airports; constant 2000$, thousands $per movement. Source: Auckland International Airport. Wellington International Airport. Christchurch International Airport. Annual reports.
airports. Overall, the annual mean productivity growth of the three airports was 2.4 per cent, which is well above the average for New Zealand industry as a whole over the period, which was 1.0 per cent and comparable to that of the broader transport sector, which during the period saw strong growth in productivity at 2.65 per cent (Statistics New Zealand, Productivity). This conclusion seems to be in line with international benchmarking studies that have shown that New Zealand airports have performed reasonably well (Air Transport Research Society, 2003, 2005; Lam et al., 2009). This growth in productivity however, seems to have been caused mainly by the improved management of movements of larger aircraft with more passengers, rather than a greater flow of aircraft movements. A second conclusion from the productivity study is that it is difficult to determine whether mainly privately-owned airports are substantially more efficient than mainly government-owned
counterparts. Christchurch, in the face of a difficult period in the later years of the study, still saw improved performance. On the whole, it would appear that local conditions such as Wellington's constrained and congested space, Auckland's status as a major hub airport, and Christchurch's reliance on tourist traffic, are more important factors. Ownership does, however, seem to have a demonstrable influence on airport pricing of both airlines and travellers. If the efficiency of the three airports has been improved since corporatisation, a fair question is, who has benefited most from this process? Looking at average revenues reported in Fig. 3, it is difficult to claim that the users of the airports have directly benefited much, except in the case of Christchurch between 1996 and 2010. There has been no substantial reduction in charges and so it is fairly clear that passengers and airlines have not especially benefitted.
Table 3 Malmquist Index summary of firm means for New Zealand three main Airports, 1991/92 to 2010/11. Firm
Efficiency change
Technological change
Pure efficiency change
Scale efficiency change
Total factor productivity change
Auckland Wellington Christchurch Mean
1.000 1.000 0.984 0.995
1.041 1.013 1.036 1.030
1.000 1.000 0.999 1.000
1.000 1.000 0.984 0.995
1.041 1.013 1.019 1.024
Source: Author's estimates.
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Airport shareholders, including the three local councils that own shares (Wellington City Council, Auckland Council, and Christchurch City Council), seem to have benefited somewhat. Cash flow from the increased efficiency also has enabled capital expenditures at the three airports. Since 1998, capital spending by the three main airports in New Zealand has risen considerably as the facilities for users have been greatly enhanced (see Fig. 5). If users have benefited from the steady rise in productivity at all, it has been in terms of the quality of facilities rather than level of prices. 4.3. Ownership, scale and efficiency
Fig. 4. Index of partial productivity indicators three main New Zealand airports: (aircraft and passenger movements per runway length) 1991/92 to 2011/12. Source: Aucland International Airport. Wellington International Airport. Christchurch International Airport. Annual Reports.
Fig. 5. Index of partial productivity indicators three main New Zealand airports: (Real operating expenses per aircraft and passenger movements) 1991/92 to 2011/12. Source: Aucland International Airport. Wellington International Airport. Christchurch International Airport. Annual Reports.
In the second part of the study, DEA was first used to determine relative efficiency scores for thirteen New Zealand airports. The results of this estimation are summarised in Table 4. The second column presents the technical efficiency scores assuming constant returns to scale. The pure technical efficiency scores derived with variable returns to scale are presented in the third column. Scale efficiency scores, presented in column four, are calculated by comparing pure technical efficiency to technical efficiency, indicating the amount by which productivity can be increased by moving towards the technically optimal productive scale. If a firm is on the increasing returns to scale of a production function then it is scale inefficient (Coelli et al., 2005, pp. 58e61). The estimated returns to scale are presented in the final column, where IRS stands for increasing returns to scale and DRS stands for decreasing returns to scale. From these results, Wellington and Auckland airports appear most often to be at or near the best practise frontier in terms of both constant and variable returns-to-scale efficiency. The other airports tend to be significantly below that of the best practise level of efficiency. The smaller airports in particular seem to exhibit low levels of scale efficiency and increasing returns to scale. The two larger airports also seem to exhibit relatively high levels of scale efficiency. In terms of ownership, the two major privately owned airports (Wellington and Auckland) are the most efficient, although it is possible that this is due to their size and high volumes of traffic rather than ownership structures. Christchurch, the third largest airport, shows a lower level of efficiency but, as previously mentioned, this airport was more adversely affected by economic and tourism downturns in 2008 and 2011, so any assessment of its performance must take these factors into account. It is notable that the Hamilton airport managed to achieve relatively high levels of efficiency in some years, despite government ownership and relatively small size (at least compared to
Fig. 6. Capital expenditure at New Zealand, three main airports, 1991/92 to 2011/12, $000. Source: Auckland International Airport, Wellington International Airport, Christchurch International Airport, Annual Reports.
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Table 4 Efficiency scores for New Zealand airports 2005 to 2012. Airport IATA Code & year
Technical efficiency Constant returns
Pure technical Efficiency Variable returns
Scale efficiency
Estimated returns to scale
Auckland AKL 2005-12 Wellington WLG 2005-12 Christchurch CGC 2005-12 Dunedin DUD 2005-12 Hamilton HLZ 2005-2012 Palmerston North PMP 2005-12 Invercargill IVC 2005-11 Queenstown ZQN 2005-12 New Plymouth 2009-12 Roturua ROT 2010-12 Nelson NSN 2005-12 Blenheim BHE 2010-12
0.973 0.940 0.493 0.410 0.815 0.760 0.364 0.520 0.761 0.370 0.864 0.660 0.680
0.988 0.960 0.912 0.410 0.820 0.770 0.381 0.520 0.838 0.390 0.897 0.820 0.743
0.985 0.980 0.542 1.000 0.993 0.990 0.959 1.000 0.906 0.960 0.964 0.810 0.927
drs irs drs e drs irs irs e irs irs irs irs e
Source: Author's estimates.
Auckland and Wellington). What seems clear, though, is that the smaller airports do suffer somewhat from low traffic volumes, which in turn creates low economies of scale. Looking at the results of the second-stage regressions, there appears to be further evidence that airports achieve higher levels of efficiency the greater the size of their operations. Table 5 provides the results of the relationship between the dependent variable (efficiency) and the four other variables separately run. Three variables (size, private ownership, and joint-venture ownership) all were significantly related to efficiency; the variable for singleauthority ownership variable was not. The findings here indicate that there is a statistically significant relationship between the size of an airport and its efficiency levels. A similar relationship was found between the private ownership and efficiency as well, but it should be remembered that the sample of privately-owned airports is small; as they also are two of the largest in the country, this may just be a consequence of their relative size rather than their ownership type. There was also a statistically significant negative relationship between the joint ownership of the airports and levels of efficiency. In other words, the joint ownership of airports is associated with a lower level of efficiency. Although not a strong explanation of the level of efficiency, the relationship is notable. 5. Conclusion The airports in New Zealand have made a vital contribution to the country's economic well-being. Over the years since the early 1990s, the major airports in New Zealand have handled growing numbers of passengers. At the same time, they have considerably increased productivity. This is especially true over the longer term, when accounting for short-term fluctuations in efficiency due to changes in activity levels. In looking at changes in productivity over time, it is important to observe relatively long periods of time, as productivity in the short term can vary because of the coupling of Table 5 Stage-two regression (sample size - 87). Variable
a
S P C J
0.475 0.615 0.717 0.731
b
t-value 0.544 0.569 0.171 0.289
5.866 6.296 1.57 2.733
Sig. level
R squared
0 0 0.120 0.008
0.296 0.324 0.029 0.084
Source: Authors' calculation. S e size (number of aircraft movements). P e private ownership (dummy variable). C e local council owned (dummy variable). J e Joint venture owned (dummy variable).
large-scale fixed assets, with sharp fluctuations in passenger movements and thus utilization. In the case of the three main airports, the long-term increase in productivity tended appears to have generated additional funds for investing in airport expansion rather than leading to any sizeable decline in real airport charges and fares to passengers. Although the largest of the airports in New Zealand operate at reasonably high levels of efficiency, this is not so true of the smaller, regional ones. Indeed, the airports in New Zealand seem to illustrate economies of scale in the operation of airports, at least within the bounds of the scale of the existing airports. In terms of ownership the results are not so clear, although there does appear to be some correlation between lower levels of efficiency and joint ownership. This might be due to a range of reasons, but the lack of ability to respond to market changes because of the need to satisfy multiple councils might be a reason. That said, this relationship is not a major cause of variation in efficiency amongst New Zealand's airports. In terms of private versus public ownership, not much can be surmised as the two privately owned airports in the sample also are two of the country's largest. Any apparent difference between these two airports and other airports in terms of efficiency might be due more to their relative size rather than their ownership structure. Further research must be undertaken to come to any conclusions on this issue. References Abbott, M., Su, W., 2002. Total factor productivity and efficiency of Australian airports. Aust. Econ. Rev. 35 (3), 244e260. Adler, N., Berechman, J., 2001. Measuring airport quality from the airlines' viewpoint: an application of data envelopment analysis. Transp. Policy 8 (3), 171e181. Airways New Zealand, 2013. Aviation Movement Statistics [accessed 07.07.13.]. http://www.airways.co.nz/documents/avimove_stats.pdf. Andrew, D., Dochia, S., 2006. The Growing and Evolving Business of Private Participation in Airports: New Trends, New Actors Emerging. World Bank, Washington. Air Transport Research Society, 2003. Global Airport Benchmarking Report 2003. ATRS, Vancouver. Air Transport Research Society, 2005. Global Airport Benchmarking Report 2005. ATRS, Vancouver. Assaf, A.G., 2010. Bootstrapped scale efficiency measures of UK airports. J. Air Transp. Manag. 16 (1), 42e44. Assaf, A.G., Gillen, D., 2012. Measuring the joint impact of governance form and economic regulation on airport efficiency. Eur. J. Operational Res. 220, 187e198. Barros, C.P., Assef, A., 2009. Productivity Change in USA Airports: the Gillen and Lall Approach Revisited. Working Paper 22/2009/DE/UECE. School of Economics and Management, Technical University of Lisbon. Barros, C.P., Weber, W.L., 2009. Productivity growth and biased technological change in UK airports. Transp. Res. Part E 45 (4), 642e653. Bazargan, M., Vasigh, B., 2003. Size versus efficiency: a case study of US commercial
M. Abbott / Utilities Policy 36 (2015) 1e9 airports. J. Air Transp. Manag. 9 (3), 187e193. Chi-Lok, A.Y., Zhang, A., 2009. Effects of competition and policy change on Chinese airport productivity: an empirical investigation. J. Air Transp. Manag. 15 (4), 166e174. Coelli, T., Rao, P., O'Donnell, C.J., Battese, G.E., 2005. An Introduction to Efficiency and Productivity Analysis, second ed. Springer, , New York. De la Cruz, S.F., 1999. A DEA approach to the airport production function. Int. J. Transp. Econ. 26, 255e270. Fare, R., Grosskopf, S., Knox Lovell, C.A., 1985. The Measurement of Efficiency of Production. Kluwer-Nijhoff, Boston. Fernandes, E., Paceco, R.R., 2005. Efficient use of airport capacity. Transp. Res. Part A 36, 225e238. Fung, M., Wan, K., Hui, Y., Law, J.S., 2008. Productivity changes in Chinese airports 1990-2004. Transp. Res. Part E 44, 521e542. Gillen, D., Lall, A., 1997. Developing Measures of Airport Productivity and Performance: an Application of Data Envelopment Analysis. Paper presented to the ATRG Conference, Vancouver. Gillen, D., Lall, A., 2001. Non-parametric measures of efficiency of US airports. Int. J. Transp. Econ. 28 (3), 283e306. Graham, A., Holved, T., 2000. Efficiency Measurement for Airports. Paper presented at the Trafik Dags PAA Aalborg University. Hawke’s Bay Airport, 2009-2012. Annual Report. Hawke’s Bay Airport, Napier. Jarzemskiene, H., 2012. Applying the method of measuring airport productivity in the Baltic regions. Transport 27 (2), 178e186. Lam, S., Low, J., Tang, L., 2009. Operational efficiencies across Asia Pacific airports. Transp. Res. Part E 45 (4), 654e665. Liebert, V., Niemeier, H.M., 2013. A survey of empirical research on the productivity and efficiency measurement of airports. J. Transp. Econ. Policy 47 (2), 157e189. Lim, L.C., Hong, C.H., 2006. Operational performance evaluation of international major airports: an application of data envelopment analysis. J. Air Transp. Manag. 12 (6), 342e351. McGreal, M., 2003. A History of Civil Aviation in New Zealand. David Bateman, Auckland. Marlborough Airport, 2010-2012. Annual Report for the Financial Year. Marlborough Airport, Marlborough. Marques, R.C., Barros, C.P., 2011. Performance of European airports: regulation, ownership and managerial efficiency. Appl. Econ. Lett. 18 (1), 29e37. Martin, J.C., Roman, C., 2001. An application of DEA to measure the efficiency of Spanish airports prior to privatization. J. Air Transp. Manag. 7, 149e157. Martin-Cejas, R., 2002. An approximation to the productive efficiency of the Spanish airports network through a deterministic cost frontier. J. Air Transp. Manag. 8, 233e238. Megginson, W.L., 2010. Privatization and finance. Annu. Rev. Financial Econ. 2, 145e174. Megginson, W.L., Netter, J.M., 2001. From state to market: a survey of empirical studies on privatization’. J. Econ. Literature 39, 321e389. Murillo-Melchor, C., 1999. An analysis of technical efficiency and productivity changes in Spanish airports by using the Malmquist index. Int. J. Transp. Econ. 26, 271e292. New Plymouth District Council, 2010-2012. Annual Report. New Plymouth District Council, New Plymouth. Ogilvie, G., 2003. The Riddle of Richard Pearse: the Story of New Zealand's Pioneer Aviator and Inventor, fourth ed. Reed, Auckland.
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Oum, T.H., Yu, C., Fu, X., 2003. A comparative analysis of productivity performance of the world's major airports: summary report of the ATRS global airport benchmarking research report -2002. J. Air Transp. Manag. 9 (5), 285e298. Oum, T.H., Adler, N., Yu, C., 2006. Privatization, corporatization, ownership forms and their effects on the performance of the world's airports. J. Air Transp. Manag. 12, 109e121. Oum, T.H., Yan, J., Yu, C., 2008. Ownership forms Matter for airport efficiency: a Stochastic frontier investigation of worldwide airports. J. Urban Econ. 64, 422e435. Pacheco, R.R., Fernandes, E., 2003. Managerial efficiency of Brazilian airports. Transp. Res. Part A 37, 667e680. Parker, D., 1999. The performance of BAA before and after privatization. J. Transp. Econ. Policy 33, 133e145. Pels, E., Nijkamp, P., Rietveld, P., 2001. Relative efficiency of European airports. Transp. Policy 8 (3), 183e192. Pels, E., Nijkamp, P., Rietveld, P., 2003. Inefficiencies and scale economies of European airport operations. Transp. Res. Part E. 39, 341e361. Pereleman, S., Serekinsky, T., 2010. Measuring the Technical Efficiency of Airports. Policy Research Working Paper 5339. World Bank, Washington. Pollitt, M.G., 1999. A Survey of the Liberalisation of Public Enterprises in the UK since 1979. University of Cambridge Unpublished mimeo. Ross, J.M.S., 1955. Official History of New Zealand in the Second World War 193945: the Royal New Zealand Airforce. Government Printer, Wellington. Rotorua Regional Airport, 2010-2012. Financial Statements for the Year Ended. Rotorua Regional Airport, Rotorua. Sarkis, J., 2000. An analysis of the operational efficiency of major airports in the United States. J. Operations Manag. 18, 341e361. Sarkis, J., Talluri, S., 2004. Performance based clustering for benchmarking of US airports. Transp. Res. Part A 38, 329e346. Serebrisky, T., 2012. Airport Economics in Latin America and the Caribbean: Benchmarking, Regulation and Pricing. World Bank, Washington. Swedavia, A.B., McGregor & Co, 1988. Swedavia-McGregor Report: Review of Civil Aviation Safety Regulations and the Resources, Structure and Functions of the New Zealand Ministry of Transport Civil Aviation Division; Prepared under the Auspices of a Steering Committee Representing Ministry of Transport, the Treasury, State Services Commission, Department of Trade and Industry. Swedavia AB, McGregor & Co., [1988], Wellington. Tolfari, S.R., Ashford, N., Caves, R.E., 1990. The Cost of Air Service Fragmentation. Department of Transport Technology, University of Technology, Loughbourgh. Tsui, W.H.K., Balli, H.O., Gilbey, A., Gow, H., 2014a. Operational efficiency of AsiaPacific airports. J. Air Transp. Manag. 40, 16e24. Tsui, W.H.K., Gilbey, A., Balli, H.O., 2014b. Estimating airport efficiency of New Zealand airports. J. Air Transp. Manag. 35, 78e96. Vogel, H.A., 2006. Impact of privatisation on the financial and economic performance of European airports. Aeronautical J. 110 (1106), 197e213. Yang, Hsu-Hao, 2010. Efficiency and productivity evidence from international airports in the Asia-Pacific region. J. Chin. Inst. Industrial Eng. 27 (2), 157e168. Yokomi, M., 2005. Measurement of Malmquist index of privatised BAA plc. In: Paper presented at the 9th ATRS Conference 2005, Rio de Janiero. Yoshida, Y., Fujimoto, H., 2004. Japanese airport benchmarking with the DEA and endogenous weight TFP methods: testing the criticism of over-investment in Japanese regional airports. Transp. Res. Part E: Logist. Transp. Rev. 40 (6), 533e546.
Contents lists available at ScienceDirect
Utilities Policy journal homepage: www.elsevier.com/locate/jup
Reform and efficiency of New Zealand's airports Malcolm Abbott Swinburne University of Technology, Melbourne, Australia
a r t i c l e i n f o
a b s t r a c t
Article history: Received 29 March 2015 Received in revised form 12 May 2015 Accepted 12 May 2015 Available online xxx
The paper analyses the efficiency performance of New Zealand's airports in the context of structural reform. This study is in two parts using two separate databases. In the first part a Malmquist Data Envelopment Analysis approach is used to estimate the productivity change over the longer term of the country's three largest airports between 1991/92 and 2011/12. Partial productivity indicators are used to supplement and reinforce this analysis. In the second part, a separate database is used with Data Envelopment Analysis in a two-stage process to determine the impact of scale economies and ownership type on levels of efficiency. The first part of the study found that the efficiency and productivity of the three airports improved over the years, although this was influenced to some degree by locational factors. The second part of the study found that the larger airports were more efficient than the smaller ones, and jointly owned airports are somewhat less efficient. Productivity gains appear to enable airport expansion, rather than price reductions. © 2015 Elsevier Ltd. All rights reserved.
Keywords: Airports Efficiency Productivity Performance
1. Introduction During the past three decades, the manner in which governments run state-owned enterprises in many countries has transformed. In particular, change has involved both the “corporatisation” and the “privatisation” of many businesses. Since the early 1980s, governments in over 190 countries have sold state-owned assets, raising $2 trillion in the process (Megginson, 2010; Megginson and Netter, 2001). Governments in corporatising and privatising state-owned assets have been motivated by a number of factors, although one of the most important ones has been the growing view that reformed companies are more efficient. A range of studies have shown that privately-owned firms tend to have greater levels of efficiency, and profitability than government-owned ones (Megginson and Netter, 2001; Pollitt, 1999). With airports, there has been a trend toward privatisation, although government ownership is still common in North America, Europe, and Asia. Notable government sales of airports have occurred in countries such as the United Kingdom, Austria, Denmark, Japan, Germany, Hungary, Australia and New Zealand (Andrew and Dochia, 2006; Oum et al., 2006). In the case of the privatised airports, the evidence on their relative efficiency compared to state-owned ones is mixed. The aviation industry plays an important role in the development of the New Zealand economy. In the year 2013, some 2.7
E-mail address: [email protected]. http://dx.doi.org/10.1016/j.jup.2015.05.001 0957-1787/© 2015 Elsevier Ltd. All rights reserved.
million tourists visited New Zealand (mostly by aeroplane), with the tourism industry generating NZ$ 11.1 billion, or 16.1 per cent of the country's export income (Statistics New Zealand, Tourism satellite account). In 2014 New Zealand had 38 airports or aerodromes with scheduled air services. Of these, seven airports have international airline services and fourteen are large enough to require managed air traffic, which is conducted by the state-owned enterprise; Airways New Zealand. Those New Zealand airports with regular passenger services, and managed air traffic, have a considerable range in size. The largest is Auckland Airport, with around 156,000 aircraft movements per year and the smallest is Gisborne, with around 20,000 per annum (Airways New Zealand, Statistics). In addition there is a range of smaller scale airports whose air traffic is not managed by Airways New Zealand and for which no publically available data on air traffic are available. Table 1 provides some descriptive details about a range of New Zealand's airports. As well as differing in size, New Zealand's airports have some variety in terms of ownership. They can be divided into three types. The first type consists of those like Auckland and Wellington airports, which are predominantly owned by private investors (with a smaller share owned by local councils); the second consists of those like Hawke's Bay and Hamilton, which are owned by a combination of different government authorities (none controlling); and the last consists of those like Christchurch, which are owned largely by a single local government authority (with perhaps a minority shareholder). Policy makers in New Zealand have tried to introduce
2
M. Abbott / Utilities Policy 36 (2015) 1e9
Table 1 Airports with scheduled airline services in New Zealand, with air traffic managed by Airways New Zealand. Airport IATA Code
History
Airline services
Owned by
Aircraft movement 2010/11 2011/12
Return on assets 2010/11 2011/12
Auckland Airport AKL
Opened 1965& operated by the Auckland Regional Authority. Funded by local and NZ government funds. Corporatised 1988.Privatised government share 1998. Opened 1958. Funded by local and NZ Government funds. Corportised 1988. Privatised government share 1998. Opened 1940. Owned and operated by local council. Corporatised 1988.
Full International
Private 78% Auckland Council 22%
156,484 155,903
10.2% 10.9%
Limited International
67% Infratil 33% Wellington City Council
105,585 102,454
3.8% 3.5%
Full International
75% Christchurch City Holdings Ltd NZ Government 25%
121,112 108,757
4.0% 3.3%
Opened 1962. Operated as joint venture between local council & NZ Government. Corporatised 1988. Opened 1935. Owned and operated by local government authorities. Corporatised in 1989.
Limited International Limited International
29,229 25,328 110,419 128,744
0.6% 2.7% 1.1% 1.5%
Opened 1939. Joint venture from 1958 between local council & NZ Government. Corporatised 1994. Opened 1940. Owned by local government authority. Since 2004 operated by the Eastland Group. Opened 1963. Operated by joint venture of local councils & NZ Government. Corporatised 2009. Opened 1933. Owned & operated by joint venture between local council & NZ Government. Became a council controlled organisation. Opened 1963. Originally a joint venture between local council & NZ Government, later taken over by the local government and corporatised in 1990. Opened in 1958. Founded by City Council. Became Joint venture between city council and NZ Government in 1958. Corporatised 1989. Local council owned and operated. Corporatised.1998
Domestic only
NZ Government 50% Dunedin City Council 50% Council (50%), Waipa (15.625%), Waikato (15.625%), Matamata-Piako (15.625%) and Otorohanga District Councils (3.125%). NZ Government 45% Invercargill City Council 55% Owned by Eastland Community Trust Gisborne District Council 100% NZ Government 50%, Napier 25%, Hastings 25%. New Plymouth District Council 50% NZ Government 50%
30,840 28,491 22,459 19,594 27,332 25,242 32,791 30,773
3.3% na na na 6.0% Na 0.2% 0.6%
Wellington International Airport WLG Christchurch International Airport CHC Dunedin International Airport DUD Hamilton International Airport HLZ Invercargill Airport IVC Gisborne Airport GIS Hawkes Bay Airport NPE New Plymouth Airport NPL Rotorua International Airport ROT Palmerston North International Airport PMP Nelson Airport NSN Marlborough Airport BHE Queenstown Airport ZQN
Opened 1939. Local council owned and operated. Corporatised. Opened 1951. Local council owned & operated. Corporatised. 1989. Auckland airport bought 25% share 2010
Domestic only Domestic only Domestic only
Limited International
Roturoa District Council 100%
22,682 22,092
6.2% 2.1%
Limited International
Palmerston North City Council 86.5%, Central Avion Holdings Ltd 13.5%
65,708 67,395
2.7% 2.6%
Domestic only Domestic only
Nelson City Council 50% Tasman District Council 50% Marlborough District Council 100%
Limited International
Queenstown Lakes District Council 75% Auckland Airport 25$
50,094 48,073 23,660 22,689 41,769 43,776
20.2% 22.3% 0.9% 7.5% 6.7% 7.6%
Source: Annual reports.
reforms that raise the level of efficiency and productivity of stateowned enterprises. Given differences in their scale and ownership structures it is possible to not only look at how productivity changes over time, but also possible to see if there is a link between scale and ownership structure on the one hand and efficiency performance on the other. In looking at the efficiency of the airports in New Zealand this study uses Data Envelopment Analysis (DEA) and partial productivity indicators to analyse two separate sets of data. In the first part of this study a Malmquist DEA approach is used to determine the change in productivity of New Zealand's three major airports over the longer term (1992e2012). Partial productivity indicators are also used. In the second, part a two-stage methodology was applied to a wider range of airports (over a shorter period). DEA was used to determine relative levels of efficiency of airports in the sample and second-stage regression was then used to determine if there is any link between efficiency levels and scale and ownership type. In the following section of this paper, a description of the background of the reform to the main airports in New Zealand is given. Next is a literature review and description of the methodology used. This is followed by an analysis of their performance during this period and, in the final section, some conclusions are made.
2. New Zealand's airports In order to understand the nature of the structure of the airport industry in New Zealand, it is necessary to know some background. Aviation is reputed to have begun in New Zealand on the 31 March 1903 when Richard Pearse flew the first heavier-than-air machine (Ogilvie, 2003). Interest in aviation was enthusiastic in New Zealand before the First World War, but it was only after the War that many of the country's aerodromes were built. At this time, aerodrome development was funded mainly by local government authorities and private clubs (Ross, 1955). The central government became involved and the first regulated activity in the industry came with the passage of the Aviation Act (1918), which provided for the issuing of certificates of proficiency to pilots, licensed flying schools, and prescribed areas for navigation. In 1920 a nine member Air Board was established to act in an advisory capacity to the Government. Later, the Air Navigation Act 1931 enabled the Government to meet international regulations and the Transport Licensing (Commercial Aircraft Services) Act (1934) laid down conditions that applicants had to meet in order to gain a license to start an air-services business. To administer these requirements, the Air Department was established in 1937; it covered both military and civil aviation until 1964 when a Department of
M. Abbott / Utilities Policy 36 (2015) 1e9
Civil Aviation was created to separate oversight from military aviation. In 1968, the Civil Aviation Department became a Division of the Ministry of Transport, with responsibility for the setting and maintaining of safety standards in the aviation industry, conducting air-traffic management, and developing aviation policy (McGreal, 2003). This meant that there was some functional split between the operation of the airports (by local government authorities) and regulation and policy development (by the central government). Despite this involvement in the regulation of the industry, the New Zealand Government was not directly involved in the establishment of airports. Instead, the construction of airports was undertaken by single local government authorities or combinations thereof. The central government did, however, assist with the funding of airport expansion. In 1929, the Local Government (Aviation Encouragement) Act was passed, which provided funds and assistance to local government authorities from the Public Works Department. The central government was also involved in the funding and construction of airports during the Second World War. During the 1950s and 1960s, with the advent of larger aircraft and greater volumes of air traffic, the upgrading of the airports also proved to beyond the resources of local government. The New Zealand Government, therefore, became further involved in the development of the major airports, generally using a funding formula for airport development of 50 per cent central and 50 per cent local government. This arrangement was formally established in 1966 with the passage of the Airport Authorities Act. The consolidation of policy development, air-traffic management, and aviation regulatory functions into a single government department, however, began to be questioned in the 1980s. The first step in reform was the creation of the state-owned company, Airways Corporation of New Zealand (Airways New Zealand), which was made responsible for the managing of New Zealand's airspace. It was established in April 1987 under the State-Owned Enterprises Act 1986 (McGreal, 2003). In September 1987, a subsidiary of the Swedish Civil Aviation Authority (Swedavia AB) was appointed to investigate the industry in partnership with a New Zealand company, MacGregor & Co. The subsequent SwedaviaMcGregor Report advocated the further separation of policy and regulatory responsibilities, which led to the passage of the Civil Aviation Act 1990 (Swedavia and McGregor, 1988). This created the Civil Aviation Authority as a separate government agency on 10 August 1992 (McGreal, 2003). The Authority was responsible for establishing civil safety and security standards and managing civilian pilot, aerodrome, and aircraft licensing. Simultaneously, moves were made to establish the airports as independent, corporatised enterprises. In 1986, a legislative amendment was passed allowing local councils to form and hold shares in airport companies. This change paved the way for the creation of companies to own and operate the airports (corporatisation) and later for the sale of these shares to private interests (privatisation) (McGreal, 2003). Many of the local authorities have since undertaken this corporatisation, and today only the smallest of New Zealand's airports are still operated as part of local government authorities. At the same time as these developments in New Zealand, there was a worldwide trend towards the corporatisation of airports. Early on, the Wilson Labour Party Government in the United Kingdom created the British Airports Authority in 1966 to manage some of Britain's government-owned airports (Heathrow, Gatwick, Stansted, Prestwick, Edinburgh, and Glasgow) (Parker, 1999). In Australia, the Federal Airports Corporation was established in 1989 by the Hawke Labor Party Government to operate a number of airports in that country (Abbott and Su, 2002). In both cases, the respective national government operated a number of airports through government-owned companies, rather than breaking
3
them up into individual airport companies. In New Zealand, by contrast, corporatisation of the individual airports took place on the initiative of local government authorities, which meant that they were established as separate companies. In the late 1990s, the Bolger National Party Government decided to reduce its involvement in the development and ownership of airports. In the case of two of the major airports (Auckland and Wellington), the shares owned by the New Zealand Government were sold to private investors, giving these two airports majority private ownership. In one case (Christchurch), the shares of the national government were sold to the local government authority. The reluctance on the part of local government bodies to reduce their ownership of airports has meant than many of New Zealand's smaller airports are still under government ownership. 3. Methodology and literature One way to determine levels of efficiency is to apply Data Envelopment Analysis (DEA). DEA is a non-parametric technique that uses linear programming to benchmark decision-making units in a sample against each other. Its advantage is that it can be used in circumstances where input and output prices are distorted by market power or government restrictions (Fare et al., 1985). This makes it a very useful tool in the case of airports, which are often monopolies in their own locational markets. DEA breaks down the components that drive efficiency into technical efficiency (how close a unit is to a best-practice frontier) and scale efficiency (the extent to which an organisation can take advantage of returns to scale by altering its size towards the optimal scale) (Coelli et al., 2005). DEA has been used in a number of cases to benchmark the operations of airports for a single or a number of years. Examples of these studies include those for Britain (Tolfari et al., 1990; Bazargan and Vasigh, 2003; Parker, 1999), North America (Gillen and Lall, 1997; Sarkis, 2000; Sarkis and Talluri, 2004), Spain (De la Cruz, 1999; Martin and Roman, 2001), Brazil (Pacheco and Fernandes, 2003; Fernandes and Paceco, 2005); the Baltic region (Jarzemskiene, 2012), Japan (Yoshida and Fujimoto, 2004), Europe (Pels et al., 2001, 2003), AsiaePacific (Tsui et al., 2014), worldwide (Graham and Holved, 2000; Adler and Berechman, 2001), and New Zealand (Tsui et al., 2014). For a comprehensive survey of productivity and efficiency studies of airports, see Liebert and Niemeier (2013). Tsui et al. (2014) include Auckland airport in their sample of 21 airports, finding it fairly efficient compared to the sample. Tsui et al. (2014) looked more specifically at a sample of New Zealand airports, but over a relatively short period of time (2010e2012) and without consideration of the issue of joint ownership structure as a cause of efficiency or inefficiency. Airports are simply benchmarked against each other, with the best airport in its best year being given the value of 1.0 and the airports in various other years ranked in relation to the best practice airport/year. If data are available, it is possible to benchmark the units against each other over time, therefore producing measures of change in productivity. The Malmquist DEA approach uses panel data to estimate changes in technical efficiency, technological progress (change), and total-factor productivity for a sample of like organisations. In effect, the Malmquist DEA approach derives an efficiency measure for one year relative to the prior year. The DEA Malmquist approach has been used in a number of cases to measure change in total-factor productivity of airports over time; including for Britain (Barros and Weber, 2009; Yokomi, 2005), the United States (Barros and Assef, 2009; Gillen and Lall, 2001), for Australia (Abbott and Su, 2002), Spain (Murillo-Melchor, 1999), Latin America (Pereleman and Serekinsky, 2010), Asia (Yang, 2010);
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and China (Chi-Lok and Zhang, 2009; Fung et al., 2008). Applying DEA requires a definition of airport outputs and inputs. In undertaking a study of the productivity change, it is necessary to have comparable data, over time and among the different entities analysed. In the case of New Zealand's airports this is not necessarily an easy task. Available data vary over airports and time periods, making it difficult to build a sample of like entities. This is why in this study two approaches are used. The first takes the three major airports in New Zealand to estimate Malmquist DEA productivity over the long term. These three airports are used because they are New Zealand's most important airports and similar, publically available data exist for them; this is not so true for many of the other, smaller airports in New Zealand. Past studies using DEA for airports have used various measures of outputs (such as air-traffic movements and the number of passengers and volume of cargo carried) and inputs (such as labour employed as an indicator of labour input and some combination of land, runway length, terminal space, and number of gates as indicators of capital inputs). Using air-traffic movements as an output indicator over time presents a problem due to the recent trend of using larger and fewer aircraft and aircraft movements to carry more passengers. For that reason, it is better to use both the number of aircraft movements and passengers as the indicators of output. In this study, pooled data for the three major New Zealand airports were analysed for the 21 years between 1991/92 and 2011/12. For inputs, runway length, and operating expenses (in constant dollar terms) were used (derived using the program DEAP; Coelli et al., 2005). The results are reported in the following section. As a three-airport sample is a relatively small one, partial productivity indicators were used to supplement and reinforce the findings of the DEA study. The DEA study is, therefore, illustrative rather than conclusive. Table 2 provides partial productivity labour and capital productivity figures for the three airports combined, and Figs. 4 and 5 provide partial figures using aircraft and passenger movements per runway length and real operating expenses (deflated figures) compared to aircraft and passenger movements. In the second part of this study, pooled data from thirteen airports was used.1 Data were taken between the financial years 2004/ 05 and 2011/12 for the majority of the airports (the exceptions being Hawke's Bay 2008/09e2011/12; New Plymouth 2009/10/ 11e2011/12; Rotorua 2009/10e2011/12; and Marlborough 2009/ 10e2011/12).2 In this case, the performance of the thirteen airports was benchmarked against each other for each year, rather than used for the determination of Malmquist productivity changes over time. After estimating relative efficiency, a second-stage regression approach was used to determine the relationships between efficiency and airport scale and ownership type. In order to examine these issues, Tobit regressions were estimated with the efficiency levels as the dependent variable and then separately as independent variables: size in terms of aircraft movement (S) and dummy variables for private ownership (P), joint venture ownership (J), and single-authority ownership (C).3 The results are examined in the following section. On the effects of scale and ownership on the efficiency of
1 The thirteen airports chosen all had scheduled air services and managed airtraffic control. Of the airports in New Zealand whose air traffic was managed by Airways New Zealand, two were excluded from the study Paraparaumu and Gisborne, the former being privately-owned and the later operated by a Trust. In each case a lack of publically available data caused exclusion from the study. 2 These airports were exceptions because they were corporatised as separate, reporting legal entities for shorter periods than the other in the sample. 3 It is possible that a range of other variables besides size and might affect efficiency but these lie outside of the scope of this paper.
airports, there have been a number of past studies. In terms of scale, researchers have confirmed economies of scale for airports (see for instance Assaf, 2010; Gillen and Lall, 2001; Martin-Cejas, 2002; Oum et al., 2003; Pels et al., 2001). In terms of ownership, the results are more mixed. A number of studies have found no link between ownership type and efficiency (see Assaf and Gillen, 2012; Barros and Weber, 2009; Lim and Hong, 2006; Oum et al., 2008; Parker, 1999; Pereleman and Serekinsky, 2010). A few have found that private airports are more efficient (see for instance; Oum et al., 2008; Serebrisky, 2012; Marques and Barros, 2011; Yokomi, 2005; Vogel, 2006). An interesting paper relative to this work found that mixed ownership forms were the least efficient (Oum et al., 2008). As a number of New Zealand's airports have mixed ownership forms (with different local councils and the central government owning large shares), it is possible from this sample to add shed light on this issue. 4. Efficiency and performance 4.1. General performance Before looking at productivity and efficiency measures, it is informative to look at more conventional indicators of general performance. The first indicator is that of the airports' growth in activity. Fig. 1 provides data for New Zealand's three main airports for the years between 1992/93 and 2012/13. It can be seen that growth in passenger traffic at New Zealand's three major airports exceeded that of real GDP in most years during the 1990s and 2000s. This is not true, however, of air-traffic movements, indicating that much of the growth in passenger throughput was accommodated by the airport servicing of larger capacity aircraft. Growth has been somewhat slower in the last few years of the period, mainly because of the decline in the number of tourists visiting New Zealand since the 2008 global financial crisis and because of the fall in the number of tourists visiting Christchurch since the 2011 earthquake. Fig. 2 provides a second indicator based on the earnings (before interest and tax) divided by total assets for the three airports. Because these airports are monopolies in their own jurisdictions, profit rates are generally not very good indicators of company performance. The Auckland airport, for instance, is the consistently the most profitable over the period, but as can be seen from Fig. 3, it also priced aeronautical services (as indicated by the level of real aeronautical revenue per aircraft movement) above that of the two other airports. Christchurch airport, on the other hand, priced below that of the other two airports over much of this period, which could be a result of the desire by the main shareholder (Christchurch City Council) to promote the maximum amount of business through the airport, and hence tourism business in the city. Pricing at Wellington also seems to have been affected by the privatisation of the airport. Before privatisation, average revenue per aircraft movement at Wellington was below that of the other two airports (Fig. 3); following privatisation (by the early 2000s), it was raised to comparable levels of Auckland airport. As airports tend to have some degree of market power, it is better to assess their performance in terms of productivity measures rather than rely exclusively on financial or volume indicators. 4.2. Productivity change In order to see if reform has had a beneficial effect on the performance of the three major airports, it is necessary to look at their productivity levels along with prices and profits. In looking at the productivity of the airports, both partial or total productivity measures can be observed. Table 2 provides partial labour
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Table 2 New Zealand three main airport labour and capital productivity indicators, 1991/92 to 2011/12.
1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/2000 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
Passenger numbers per staff employed
Aircraft movements per staff employed
Passengers/runway length (m)
Aircraft Movements/Runway length (m)
24,803 25,236 26,030 26,674 26,700 28,178 27,962 28,320 30,374 32,808 34,849 35,914 40,029 42,072 41,483 40,938 43,629 44,505 43,713 42,262 39,037
606 614 617 619 630 665 666 670 696 710 698 689 718 656 678 636 642 643 600 574 520
1073 1141 1824 1981 1343 1390 1385 1408 1482 1551 1578 1691 1907 2020 2.058 2092 2246 2245 2.287 2266 2304
26.2 27.7 43.3 45.9 31.7 32.8 33.0 33.3 34.0 33.6 31.6 32.4 34.2 31.5 34.1 32.9 33.5 32.9 31.8 31.2 31.1
Source: Auckland International Airport, Christchurch International Airport, Wellington International Airport, Annual reports.
(passengers and aircraft movements per staff employed) and capital productivity figures (passengers and aircraft movements per runway lengths) for the three largest airports in New Zealand. As can be seen from the table, the level of passengers per staff employed at the airports rose steadily over the period. The number of aircraft movements per staff also increased up until 2008 and then declined thereafter. Table 2 also shows that passenger numbers and aircraft movements per length of runways at the three main airports also increased up until 1995 but stagnated somewhat afterwards. This indicates that it was the accommodation of larger aircraft that drove most of the productivity improvement, rather than the movement of larger numbers of aircraft. Table 3 provides the results of the DEA Malmquist productivity and efficiency change estimates based on the first part of this study. Over the study period, Wellington achieved only a 1.3 per cent per annum increase in total-factor productivity. This compares to 1.9 per cent at Christchurch and 4.1 per cent at Auckland. The large increase for Auckland must have been at least partially due to its position as a main hub airport for New Zealand and the greater
South West Pacific region, meaning that strong growth in traffic and capacity use has probably meant high productivity growth as well. Christchurch, on the other hand, also experienced growth but it was mitigated by reductions in traffic (capacity utilization) late in the period. Figs. 4 and 5 provide partial-factor productivity levels for the years 1991/92 to 2011/12 for the three main New Zealand airports in terms of combined aircraft movements and passengers per runway length and combined real operating expenses (deflated to real values) per aircraft movements and passenger numbers. A few results can be derived from this analysis. First of all, the tendency was for the productivity of the three airports to rise steadily over the period in terms of aircraft movements per runways length (but not passengers). This is an indication of the growing use of larger planes to transport greater volumes of passengers. This is also apparent from Fig. 5, where it can be seen that there has been a fall in real operating expenses per passengers but not in terms of real operating expenses per aircraft movements (see Fig. 6). Growth in productivity since the corporatisation of the three airports has been apparent and fairly consistent across all three
Fig. 1. Annual growth of New Zealand real GDP, and aircraft movements and passenger numbers through the three main airports, 1992/93 to 2012/13, percentage. Source: Auckland International Airport, Wellington International Airport. Christchurch International Airport, Annual reports. Statistics New Zealand, National accounts.
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Fig. 2. Rate of return to three main airports; 1991/92 to 2012/13, EBIT/total assets, percentage. Source: Auckland International Airport, Wellington International Airport. Christchurch International Airport, Annual Reports.
Fig. 3. Average real aeronautical revenue per aircraft movement, three main airports; constant 2000$, thousands $per movement. Source: Auckland International Airport. Wellington International Airport. Christchurch International Airport. Annual reports.
airports. Overall, the annual mean productivity growth of the three airports was 2.4 per cent, which is well above the average for New Zealand industry as a whole over the period, which was 1.0 per cent and comparable to that of the broader transport sector, which during the period saw strong growth in productivity at 2.65 per cent (Statistics New Zealand, Productivity). This conclusion seems to be in line with international benchmarking studies that have shown that New Zealand airports have performed reasonably well (Air Transport Research Society, 2003, 2005; Lam et al., 2009). This growth in productivity however, seems to have been caused mainly by the improved management of movements of larger aircraft with more passengers, rather than a greater flow of aircraft movements. A second conclusion from the productivity study is that it is difficult to determine whether mainly privately-owned airports are substantially more efficient than mainly government-owned
counterparts. Christchurch, in the face of a difficult period in the later years of the study, still saw improved performance. On the whole, it would appear that local conditions such as Wellington's constrained and congested space, Auckland's status as a major hub airport, and Christchurch's reliance on tourist traffic, are more important factors. Ownership does, however, seem to have a demonstrable influence on airport pricing of both airlines and travellers. If the efficiency of the three airports has been improved since corporatisation, a fair question is, who has benefited most from this process? Looking at average revenues reported in Fig. 3, it is difficult to claim that the users of the airports have directly benefited much, except in the case of Christchurch between 1996 and 2010. There has been no substantial reduction in charges and so it is fairly clear that passengers and airlines have not especially benefitted.
Table 3 Malmquist Index summary of firm means for New Zealand three main Airports, 1991/92 to 2010/11. Firm
Efficiency change
Technological change
Pure efficiency change
Scale efficiency change
Total factor productivity change
Auckland Wellington Christchurch Mean
1.000 1.000 0.984 0.995
1.041 1.013 1.036 1.030
1.000 1.000 0.999 1.000
1.000 1.000 0.984 0.995
1.041 1.013 1.019 1.024
Source: Author's estimates.
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Airport shareholders, including the three local councils that own shares (Wellington City Council, Auckland Council, and Christchurch City Council), seem to have benefited somewhat. Cash flow from the increased efficiency also has enabled capital expenditures at the three airports. Since 1998, capital spending by the three main airports in New Zealand has risen considerably as the facilities for users have been greatly enhanced (see Fig. 5). If users have benefited from the steady rise in productivity at all, it has been in terms of the quality of facilities rather than level of prices. 4.3. Ownership, scale and efficiency
Fig. 4. Index of partial productivity indicators three main New Zealand airports: (aircraft and passenger movements per runway length) 1991/92 to 2011/12. Source: Aucland International Airport. Wellington International Airport. Christchurch International Airport. Annual Reports.
Fig. 5. Index of partial productivity indicators three main New Zealand airports: (Real operating expenses per aircraft and passenger movements) 1991/92 to 2011/12. Source: Aucland International Airport. Wellington International Airport. Christchurch International Airport. Annual Reports.
In the second part of the study, DEA was first used to determine relative efficiency scores for thirteen New Zealand airports. The results of this estimation are summarised in Table 4. The second column presents the technical efficiency scores assuming constant returns to scale. The pure technical efficiency scores derived with variable returns to scale are presented in the third column. Scale efficiency scores, presented in column four, are calculated by comparing pure technical efficiency to technical efficiency, indicating the amount by which productivity can be increased by moving towards the technically optimal productive scale. If a firm is on the increasing returns to scale of a production function then it is scale inefficient (Coelli et al., 2005, pp. 58e61). The estimated returns to scale are presented in the final column, where IRS stands for increasing returns to scale and DRS stands for decreasing returns to scale. From these results, Wellington and Auckland airports appear most often to be at or near the best practise frontier in terms of both constant and variable returns-to-scale efficiency. The other airports tend to be significantly below that of the best practise level of efficiency. The smaller airports in particular seem to exhibit low levels of scale efficiency and increasing returns to scale. The two larger airports also seem to exhibit relatively high levels of scale efficiency. In terms of ownership, the two major privately owned airports (Wellington and Auckland) are the most efficient, although it is possible that this is due to their size and high volumes of traffic rather than ownership structures. Christchurch, the third largest airport, shows a lower level of efficiency but, as previously mentioned, this airport was more adversely affected by economic and tourism downturns in 2008 and 2011, so any assessment of its performance must take these factors into account. It is notable that the Hamilton airport managed to achieve relatively high levels of efficiency in some years, despite government ownership and relatively small size (at least compared to
Fig. 6. Capital expenditure at New Zealand, three main airports, 1991/92 to 2011/12, $000. Source: Auckland International Airport, Wellington International Airport, Christchurch International Airport, Annual Reports.
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Table 4 Efficiency scores for New Zealand airports 2005 to 2012. Airport IATA Code & year
Technical efficiency Constant returns
Pure technical Efficiency Variable returns
Scale efficiency
Estimated returns to scale
Auckland AKL 2005-12 Wellington WLG 2005-12 Christchurch CGC 2005-12 Dunedin DUD 2005-12 Hamilton HLZ 2005-2012 Palmerston North PMP 2005-12 Invercargill IVC 2005-11 Queenstown ZQN 2005-12 New Plymouth 2009-12 Roturua ROT 2010-12 Nelson NSN 2005-12 Blenheim BHE 2010-12
0.973 0.940 0.493 0.410 0.815 0.760 0.364 0.520 0.761 0.370 0.864 0.660 0.680
0.988 0.960 0.912 0.410 0.820 0.770 0.381 0.520 0.838 0.390 0.897 0.820 0.743
0.985 0.980 0.542 1.000 0.993 0.990 0.959 1.000 0.906 0.960 0.964 0.810 0.927
drs irs drs e drs irs irs e irs irs irs irs e
Source: Author's estimates.
Auckland and Wellington). What seems clear, though, is that the smaller airports do suffer somewhat from low traffic volumes, which in turn creates low economies of scale. Looking at the results of the second-stage regressions, there appears to be further evidence that airports achieve higher levels of efficiency the greater the size of their operations. Table 5 provides the results of the relationship between the dependent variable (efficiency) and the four other variables separately run. Three variables (size, private ownership, and joint-venture ownership) all were significantly related to efficiency; the variable for singleauthority ownership variable was not. The findings here indicate that there is a statistically significant relationship between the size of an airport and its efficiency levels. A similar relationship was found between the private ownership and efficiency as well, but it should be remembered that the sample of privately-owned airports is small; as they also are two of the largest in the country, this may just be a consequence of their relative size rather than their ownership type. There was also a statistically significant negative relationship between the joint ownership of the airports and levels of efficiency. In other words, the joint ownership of airports is associated with a lower level of efficiency. Although not a strong explanation of the level of efficiency, the relationship is notable. 5. Conclusion The airports in New Zealand have made a vital contribution to the country's economic well-being. Over the years since the early 1990s, the major airports in New Zealand have handled growing numbers of passengers. At the same time, they have considerably increased productivity. This is especially true over the longer term, when accounting for short-term fluctuations in efficiency due to changes in activity levels. In looking at changes in productivity over time, it is important to observe relatively long periods of time, as productivity in the short term can vary because of the coupling of Table 5 Stage-two regression (sample size - 87). Variable
a
S P C J
0.475 0.615 0.717 0.731
b
t-value 0.544 0.569 0.171 0.289
5.866 6.296 1.57 2.733
Sig. level
R squared
0 0 0.120 0.008
0.296 0.324 0.029 0.084
Source: Authors' calculation. S e size (number of aircraft movements). P e private ownership (dummy variable). C e local council owned (dummy variable). J e Joint venture owned (dummy variable).
large-scale fixed assets, with sharp fluctuations in passenger movements and thus utilization. In the case of the three main airports, the long-term increase in productivity tended appears to have generated additional funds for investing in airport expansion rather than leading to any sizeable decline in real airport charges and fares to passengers. Although the largest of the airports in New Zealand operate at reasonably high levels of efficiency, this is not so true of the smaller, regional ones. Indeed, the airports in New Zealand seem to illustrate economies of scale in the operation of airports, at least within the bounds of the scale of the existing airports. In terms of ownership the results are not so clear, although there does appear to be some correlation between lower levels of efficiency and joint ownership. This might be due to a range of reasons, but the lack of ability to respond to market changes because of the need to satisfy multiple councils might be a reason. That said, this relationship is not a major cause of variation in efficiency amongst New Zealand's airports. In terms of private versus public ownership, not much can be surmised as the two privately owned airports in the sample also are two of the country's largest. Any apparent difference between these two airports and other airports in terms of efficiency might be due more to their relative size rather than their ownership structure. Further research must be undertaken to come to any conclusions on this issue. References Abbott, M., Su, W., 2002. Total factor productivity and efficiency of Australian airports. Aust. Econ. Rev. 35 (3), 244e260. Adler, N., Berechman, J., 2001. Measuring airport quality from the airlines' viewpoint: an application of data envelopment analysis. Transp. Policy 8 (3), 171e181. Airways New Zealand, 2013. Aviation Movement Statistics [accessed 07.07.13.]. http://www.airways.co.nz/documents/avimove_stats.pdf. Andrew, D., Dochia, S., 2006. The Growing and Evolving Business of Private Participation in Airports: New Trends, New Actors Emerging. World Bank, Washington. Air Transport Research Society, 2003. Global Airport Benchmarking Report 2003. ATRS, Vancouver. Air Transport Research Society, 2005. Global Airport Benchmarking Report 2005. ATRS, Vancouver. Assaf, A.G., 2010. Bootstrapped scale efficiency measures of UK airports. J. Air Transp. Manag. 16 (1), 42e44. Assaf, A.G., Gillen, D., 2012. Measuring the joint impact of governance form and economic regulation on airport efficiency. Eur. J. Operational Res. 220, 187e198. Barros, C.P., Assef, A., 2009. Productivity Change in USA Airports: the Gillen and Lall Approach Revisited. Working Paper 22/2009/DE/UECE. School of Economics and Management, Technical University of Lisbon. Barros, C.P., Weber, W.L., 2009. Productivity growth and biased technological change in UK airports. Transp. Res. Part E 45 (4), 642e653. Bazargan, M., Vasigh, B., 2003. Size versus efficiency: a case study of US commercial
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