The efficiency of European airports: do the importance in the EU network and the intensity of competition matter?

In this paper we study the efficiency of European airports by applying a DEA model to 57 airports. The sample covers 95% of all the airports with a traffic of at least 5 millions passengers (yearly). We find that largest airports (with more than 10 millions passengers) are more efficient, while airports classified by the European Commission as national have spare capacity and should improve their performances. Largest airports have decreasing returns to scale, while national ones will get a reduction in their average costs if they increase their size of operation. Moreover we investigated the determinants of the estimated efficiency scores. The Tobit regression shows that efficiency is positively related with airport’s connectivity index in the European network (i.e. airports with better connections at the network are more efficient) and with the intensity of competition between airports (i.e. airports with nearby competitors on several destinations tend to be more efficient). These results imply that policy makers (in regulating airports’ fares and subsidizing development plans) and managers (in evaluating their assets utilization) should take into account that a well connected destinations map and the presence of indirect competition coming from other airports can improve the performances in the management of European airports.