Methodology Choices for Benchmarking Airports

This chapter discusses the ways benchmarking has been used in the airport industry, including assessing managerial performance, price regulation and informing national policy. The chapter examines issues including difficulties in providing meaningful comparisons and the approaches developed to improve the benchmarking comparisons, especially residual benchmarking. While benchmarking has many issues and limitations, it is not without value. Provided it is well designed and executed, it is a useful tool to identify deficiencies and excellence in performance. It can spur competitive forces and shake up conventional thinking. The answer to whether benchmarking with limitations is better than no benchmarking depends on how it is to be used. If used to calculate the price cap applied to an airport, then the limitations of benchmarking can have major implications, as even minor errors in the benchmarking analysis could result in a price cap costing the airport or its users millions of dollars. If used to assess the impact of policy reforms, then a broad, but imprecise measure may be sufficient, as it is not dependent on the outcome of a single airport. Benchmarking can serve as an effective decision-aid tool, but decision makers must be aware of the limitation of the analysis, and the analysis itself must demonstrate sufficient robustness.