An Assessment on the Cost Structure of the UK Airport Industry: Ownership Outcomes and Long Run Cost Economies

Anna Bottasso and Maurizio Conti

No 13, Working papers from Former Department of Economics and Public Finance "G. Prato", University of Torino

Abstract: In this paper we analyze the cost structure of the UK airport industry by estimating a variable cost function for the period 1994-2005. Overall results suggest that the long run average costs curve is U-shaped: it decreases until passenger traffic reaches approximately five millions, it remains flat over the range between five and fourteen million passengers and afterwards it starts to increase. Moreover, our findings provide evidence consistent with the existence of some degree of overcapitalization for the largest regulated airports. Finally, we analyze whether different forms of ownership entail cost differentials across airports and we find that privately owned airports are characterized by lower costs with respect to public and mixed ones, although cost differentials shrank over time as public and mixed airports improved their rate of cost reduction. Main results are robust to unobserved heterogeneity at the airport or market level and to possible endogeneity biases. Possible regulatory and policy implications of these results are also discussed.

Keywords: scale economies; public ownership; airports (search for similar items in EconPapers)
JEL-codes: L25 L91 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2010-04
New Economics Papers: this item is included in nep-eur and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.bemservizi.unito.it/repec/tur/wpaper/n13.pdf First version, 2010 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:tur:wpaper:13

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