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The Cost Structure of the UK Airport Industry

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  • Anna Bottasso
  • Maurizio Conti

Abstract

In this paper we analyse the cost structure of the UK airport industry by estimating a variable cost function for the period 1994-2005. Overall results suggest that average costs decrease until passenger traffic reaches 5 million, remain constant over the range between 5 million and 14 million passengers, and afterwards start to increase. Moreover, we find evidence consistent with the existence of overcapitalisation for the largest regulated airports. Finally, private airports seem to be characterised by lower costs, although cost differentials associated with ownership status shrank over time. The main results are robust to unobserved heterogeneity and to endogeneity biases. © 2012 LSE and the University of Bath

Suggested Citation

  • Anna Bottasso & Maurizio Conti, 2012. "The Cost Structure of the UK Airport Industry," Journal of Transport Economics and Policy, University of Bath, vol. 46(3), pages 313-332, September.
    • Handle: RePEc:tpe:jtecpo:v:46:y:2012:i:3:p:313-332
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    Citations

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    Cited by:

    1. Voltes-Dorta, Augusto & Lei, Zheng, 2013. "The impact of airline differentiation on marginal cost pricing at UK airports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 55(C), pages 72-88.
    2. Hidalgo-Gallego, Soraya & Núñez-Sánchez, Ramón & Coto-Millán, Pablo, 2017. "Spatial non-price competition in port infrastructure services," MPRA Paper 80417, University Library of Munich, Germany.
    3. Karanki, Fecri & Lim, Siew Hoon, 2021. "Airport use agreements and cost efficiency of U.S. airports," Transport Policy, Elsevier, vol. 114(C), pages 68-77.
    4. Budd, Lucy & Ison, Stephen & Graham, Anne, 2024. "Factors affecting the cessation of commercial air services at English regional airports," Journal of Transport Geography, Elsevier, vol. 118(C).
    5. Núñez-Sánchez, Ramón & Hidalgo-Gallego, Soraya & Martínez-San Román, Valeriano, 2020. "Airport charges and marginal costs for Spanish airports before the process of partial privatization," Transport Policy, Elsevier, vol. 99(C), pages 240-250.
    6. Bottasso, Anna & Conti, Maurizio & Vannoni, Davide, 2019. "Scale and (quasi) scope economies in airport technology. An application to UK airports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 125(C), pages 150-164.
    7. Adler, Nicole & Brudner, Amir & Gallotti, Riccardo & Privitera, Filippo & Ramasco, José J., 2022. "Does big data help answer big questions? The case of airport catchment areas & competition," Transportation Research Part B: Methodological, Elsevier, vol. 166(C), pages 444-467.
    8. Hidalgo-Gallego, Soraya & Mateo-Mantecón, Ingrid, 2019. "Effect of concentration in airline market on Spanish airport technical efficiency," Journal of Air Transport Management, Elsevier, vol. 76(C), pages 56-66.
    9. Hidalgo-Gallego, Soraya & Núñez-Sánchez, Ramón, 2023. "The effect of port activity on urban employment: An analysis for the Spanish functional urban areas," Journal of Transport Geography, Elsevier, vol. 108(C).
    10. Anna Bottasso & Martina Bruno & Maurizio Conti & Claudio Piga, 2017. "Competition, vertical relationship and countervailing power in the UK airport industry," Journal of Regulatory Economics, Springer, vol. 52(1), pages 37-62, August.
    11. Niemeier, Hans-Martin, 2021. "Is economics good for aviation policy? Some problems in bridging the gap between theory and policy," Journal of Air Transport Management, Elsevier, vol. 96(C).
    12. Kutlu, Levent & McCarthy, Patrick, 2016. "US airport ownership, efficiency, and heterogeneity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 89(C), pages 117-132.
    13. Fernández, Xose Luis & Gundelfinger, Javier & Coto-Millán, Pablo, 2022. "The impact of logistics and intermodality on airport efficiency," Transport Policy, Elsevier, vol. 124(C), pages 233-239.
    14. Zuidberg, Joost, 2017. "Exploring the determinants for airport profitability: Traffic characteristics, low-cost carriers, seasonality and cost efficiency," Transportation Research Part A: Policy and Practice, Elsevier, vol. 101(C), pages 61-72.
    15. Graham, Prof Anne, 2020. "Airport privatisation: A successful journey?," Journal of Air Transport Management, Elsevier, vol. 89(C).
    16. Gurtner, Gérald & Cook, Andrew & Graham, Anne & Cristóbal, Samuel, 2018. "The economic value of additional airport departure capacity," Journal of Air Transport Management, Elsevier, vol. 69(C), pages 1-14.
    17. Conti, Maurizio & Ferrara, Antonella Rita & Ferraresi, Massimiliano, 2019. "Did the EU Airport Charges Directive lead to lower aeronautical charges? Empirical evidence from a diff-in-diff research design," Economics of Transportation, Elsevier, vol. 17(C), pages 24-39.

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