United States Department of Transportation
i
Airport Costs and Production Technology: A Translog Cost Function Analysis with Implications for Economic Development [Draft]
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2011-07-01
[PDF-436.02 KB]
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NTL Classification:NTL-AVIATION-Airports and Facilities;NTL-AVIATION-Aviation Economics and Finance;
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Abstract:Based upon 50 large and medium hub airports over a 13 year period, this research estimates one and two output translog models of airport short run operating costs. Output is passengers transported on non-stop segments and pounds of cargo shipped. The number of runways is a quasi-fixed factor of production. Statistical tests reject the null hypothesis that airport production technology is homothetic and homogeneous, exhibits constant returns to scale, or reflects a Cobb-Douglas production technology. From the analysis, airports operate under increasing returns to runways utilization and increasing ray economies of scale for the two output model. Airport operating costs were 2% higher after the September 1, 2001 terrorist attacks. The input demand for general airport operations is price elastic and Morishima substitution elasticities indicate that Personnel, Repair-Maintenance-Contractual services, and General Airport Operations are substitutes in production. Based upon a one output passenger cost function model, an exploratory analysis identifies a relationship between the average cost of airport operations and indicators economic development. All else constant, a decrease in an airport’s real average operating costs is associated with increasing metropolitan employment, the number of establishments, and real gross metropolitan and state products.
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