A study on the performance evaluation of major international airports in the world

The Authors

K-J. Tseng, Department of International Business, Hsuan Chuan University, Hsin Chu, Taiwan, Republic of China

Jow-Fei Ho, Graduate Institute of Management Science and Decision Making, Tamkang University, Taipei, Taiwan, Republic of China

Yuan-Jing Liu, Department of Military Training, Tungnan University, Taipei, Taiwan, Republic of China

Abstract

Purpose – This paper aims to assess the performance evaluation of major international airports in the world.

Design/methodology/approach – In this study, the authors utilized data envelopment analysis in an input-oriented method to discuss the overall operational performance of 20 major international airports between 2001 and 2005. They used cross efficiency measure to determine the international airports that enjoy the best operational performances and used the bilateral model to compare the performance differences between international airports of different regions.

Findings – The Atlanta Airport (ATL) in the USA and the Beijing Airport (PEK) in China experienced MPSS. The overall performance of international airports in Asia is better than those in Americas, Europe, and Oceania.

Research limitations/implications – Service quality can be discuss in the field in the future.

Practical implications – In sensitivity analysis, four inputs had positive impacts on overall performances.

Originality/value – The ATL in the USA and the PEK in China were the best practices for the other international airports.

Article Type:

Research paper

Keyword(s):

International Airports; Data analysis; Performance criteria.

Journal:

Journal of Modelling in Management

Volume:

Number:

Year:

2008

pp:

71-81

Copyright ©

Emerald Group Publishing Limited

ISSN:

1746-5664

1 Research motives and purposes

“Taiwan is an island nation whose economy and tourism are heavily depended on civil aviation” (Chang, 2006). Thus, it is important to provide safe and high-quality aviation and transportation services. The overall development of civil aviation, aspects such as flight safety, flight control, regulations for civil aviation companies, standardization of airport facilities, the quality of airports, and the development of the industrial competitiveness, etc. all rely on the joint effort of the aviation authorities and airliners. In recent years, the government's efforts such as giving out more flight routes, providing chartered cross-strait flights, establishing “Taoyuan Air Cargo Park” (Free Trade Zone), helping Taiwanese airliners to acquire the right to access China's airspace … etc. are all aimed at expanding the operations for Taiwanese airports and airliners and helping them to save operational cost and stay competitive.

Recent years, due to the rapid development of the aviation market in Asian Pacific, many large international airports in the region have been expanded or constructed.

In 2004, a year-round evaluation on service-quality of 48 international airports was conducted jointly by the International Air Transportation Association and Airports Council International (ACI) via AETRA polls, which were given to the passengers who accessed these airports. The evaluation items include the attitude of the service personnel, comfort of the environment, work efficiency, and ease of access. The result shows that Hong Kong International Airport was voted the best airport in the “Global Airport Satisfaction Index Study.” An independent airline investigation agency in the UK, Skytrax, held the “Global Best Airport” competition, and the 4.85 million copies of valid questionnaires in 86 nations also voted Hong Kong International Airport the most excellent airport in the world for five years in a row (2001-2005), followed by South Korea's Incheon International Airport and Singapore's Changi Airport. The managers of international airports thus need to carefully consider how best use the limited resources and challenge their competitors in order to meet their managerial goals.

The target of this research is to examine the operation performance by considering the productivity (input/output) of each major international airports. There are three research objectives as follows:

understand the operational performance of each major international airports;
understand the performance differences between airports located in different continents; and
provide the findings to airport managers and transportation authorities.

2 Literature review

The operational performance and productivity of international airports has been studied heavily in the last decade, Adler and Berechman (2001), Francis et al. (2002) and Lin and Hong (2006) evaluated the operational performance of major international airports, MOTC (1998, 1999, 2004, 2006), Chang and Wang (2002), Park (2003), and Lin and Chen (2004) studied the performances of international airports in Asian Pacific. Humphreys and Francis (2002) and Pels et al. (2003) evaluated the counterpart in European nations, Gillen and Lall (1997), Sarkis (2000), Bazargan and Vasigh (2003) and Sarkis and Talluri (2004) studied the similar research in the USA.

In fact, the evaluation of operational performance has been done by many researchers in many regions Yu (2000, 2005), Yan and Chang (2000) and Hsu (2003) in Taiwan; Fernandes and Pacheco (2002) and Pacheco and Fernandes (2003) in Brazil; Hooper and Hensher (1997) in Australia; Martin and Roman (2001) in Spain; Yoshida and Hiroyoshi (2004) in Japan. There are nine non-data envelopment analysis – DEA-related literatures and 13 DEA-related literatures for the airports performance evaluation were reviewed in this research. Each of the above mentioned research all believe DEA is a useful technique for, analyzing productivity (input/output), evaluating the operational performance of international airports.

However, some interesting issues rather untouched are listed below:

the evaluation all the international airports through out the world;
the definition of “a truly efficient airport”;
the “return scale” problem; and
the comparisons of the airports performance difference caused by the difference of the locations.

In order to provide the information needed in the modern world, this research has done the studies on the above mentioned issues, as listed below:

the performances of major international airports throughout the world;
we adopted cross efficiency measure (CEM) proposed by Doyle and Green (1994) to determine the international airport that enjoys the best operational performance;
a complete discussion on the RTS of international airports; and
we utilized the bilateral model proposed by Cooper et al. (2000) to compare the international airports located in different regions and determine the ones with better performance.

3 Research methods and construct

3.1 Research methods

Literature survey method. From national libraries, SDOS, Elsevier, and ABI/INFORM databases, we have gathered literatures related to non-DEA and DEA-based international airport evaluations and DEA theories and those that utilized frontier reference technology-based DEA evaluations on international airports.
Quantitative methods. We used DEA to analyze the performances of international airports and the bilateral model to compare the differences between international airports in different regions.

3.2 Research construct

Our research construct is divided into six parts:

define the research question and scope;
gather important literatures that are related to the discussion of the operational performances of international airports;
determine the research methods, gather analytical data, construct a concept model of performance evaluation, and determine the input and output variables and the analytical models;
use DEA analysis and the bilateral model to compare the performance differences between international airports in different regions;
apply sensitivity analysis to evaluate influences of individual input variable on CEM performance; and
propose conclusions and suggestions.

3.3 Choose of input and output variables

Based on the important, related literatures in the past, we have determined four input variables: the number of runways, the number of aprons, the size of the airport, and the number of employees. The three output variables are determined based on the International Airport Performance Evaluation Criteria announced by ACI (2003), which are the number of movements, the amount of cargo, the number of passengers. Variables are as below:

Input variables. Runways (x ₁), aprons (x ₂), areas (x ₃) and employees (x ₄).
Output variables. Movements (y ₁), cargos (y ₂) and passengers (y ₃).

3.4 Choose of decision-making units

Based on CAI, we have chosen the 20 major international airports out of the top-30 international airports in the world that enjoy the most number of sorties, amount of cargo, and passenger person-times as our research subjects. They are listed on Table I.

Bowlin (1987) proposed that the ideal number of DMUs should be twice as many as the sum of the input and output variables. We thus chose four input variables and three output variables (seven in total) and 20 international airports, which meet this rule of thumb.

3.5 Models

CEM, bilateral model and sensitivity analysis are used to conduct analysis. The reasons why they were chosen are listed below:

CEM. We used CEM to determine the international airport that enjoys the best operational performance.
Bilateral model. This was used to compare the performance between airports located in different regions.
Sensitivity analysis. Sensitivity analysis is used to estimate the change of performance by, respectively, eliminating one input variable at a time, so that the importance of individual variable can be identified.

4 Empirical analysis

We used Saitech Inc (2005) DEA Solver Professional 4.1 to conduct the analysis of the overall and individual performance and changes in the productivity trend, and we also used Banxia Software Ltd (2003) Frontier Analyst Professional 3.0 (from the UK) for data analysis.

4.1 Overall performance analysis

The CEM calculation yields the average efficiency value of the major international airports from 2001 to 2005, as shown on Table II. The findings are:

Technical efficiency. The annual average technical efficiency of major international airports in the world is 58.5 percent, showing that although the technical level among them is still acceptable, there is definitely room for improvement.
Purely technical efficiency. The annual average purely technical efficiency of major international airports in the world is 66.6 percent, showing a good purely technical level among them. This value of Atlanta Airport (ATL) and Beijing Airport (PEK) has remained “1” for the past five years.
Scale efficiency. The annual average scale efficiency of major international airports is 87.4 percent, showing that they have reached an appropriate scale. Nine of them has maintained 0.9 or above for the past five years.
Cross efficiency. CEM calculation shows that the top five international airports are Atlanta (ATL) (0.883), Los Angeles (LAX) (0.812), Hong Kong (HKG) (0.811), Beijing (PEK) (0.808), and Tokyo Haneda (HND) (0.794).
Return to scale. Nine airports have maintained IRS for five years in a row, and only one of them (ATL) has reached RTS for four years in a row, and only one of them (TPE) has maintained DRS for three years in a row. Overall, 83 percent of them reached the state of IRS, showing that the 19 airports are at the state of increasing RTS. What we should take note of is that in 2005, 50 percent of the airports (ten of them) showed decreasing RTS.

4.2 Bilateral analysis

Based on their locations, we put the international airports in four groups for bilateral analysis, and the results are listed on Table III. Overall, the ones located in Asia perform better than all other airports. The ones in America perform better than the ones in Europe and Oceania, and the ones in Europe perform better than the ones in Oceania.

4.3 Sensitivity analysis

When eliminating runways as an input variable, efficiency scores of 20 sampled airports decrease. There is an impact and negative influence on DFW. When eliminating aprons as an input variable, efficiency scores of 18 airports decrease. There is an impact and negative influence on FCO, but a positive influence on EWR and MIA. When eliminating areas as an input variable, efficiency scores of 18 airports decrease. There is an impact and negative influence on SYD, but a positive influence on DFW and PVG. When eliminating employees as an input variable, efficiency scores of 18 airports decrease. There is an impact and negative influence on DFW and TPE, but a positive influence on LHR.

In this study, four input variables have positive changes on operational performance. Sensitivity analysis is on Table IV.

5 Conclusion and suggestions

The changes of performance among major international airports were evaluated by the DEA model in this study. Some interesting findings are listed below. Generally speaking, the overall performance of international airports is acceptable. Between 2001 and 2005, all international airports, except ATL and PEK, have failed to meet MPSS. The international airport that enjoys the best overall operational performance is ATL in the USA (0.883). In terms of the performance differences between airports in different continents. The major international airports in Asia are the better than the counterparts in other continents, America and Europe are listed in the second and the third place, respectively. The four input variables have positive influences on operational performance of sampled airports.

According to the results, there are some suggestions for the airport managers listed below:

The performance of different airports is rather similar. Airport managers should examine whether the existing resource is being fully utilized to reach their business goals.
Through RTS analysis, airport managers can adjust their operation scale in order to achieve the best status. About 50 percent of the airports showed a decline in 2005, and the reason behind it should be examined.
Overall, the airline transportation industry is growing, thus the existing facilities should be expanded when possible in order to enhance operational performance.

Based on the results of this research, there are suggestions for aviation and transportation authorities as follows:

The operational performance of the international airports in Asia is relatively better than the ones in other continents. Therefore, the expansions are worthy in order to increase the operational performances.
In terms of purely technical efficiency, Taoyuan Airport of Taiwan has reached the most appropriate scale. which had decreased from 2001 to 2003 and increased from 2004 to 2005, showing t the improvements and performance enhancement of Taoyuan Airport has been significant.
Compare the performances of oneself with the performance of the other international airports to obtain information for self improvements.

Table IDMUs

Table IIAverage annual performance

Table IIIBilateral analysis of overall performance

Table IVSensitivity analysis

References

MOTC (1998), The Actual Impact of the Liberal Policy of the Aviation and Transportation in Asian Pacific on our Nation, Institute of Transportation, Taipei, .