An empirical investigation on the efficiency, capacity and ownership of Italian airports

In this paper we study the efficiency of Italian airports applying a DEA model to a sample of 34 airports. We consider two outputs: aircraft movements and passengers. We find that large airports are more efficient that domestic and regional ones, i.e. small airports have spare capacity since they are, on average, more distant from the VRS frontier than large airports. Moreover, the latter are operating under decreasing returns to scale while increasing returns to scale arise in the small ones. These findings imply that further investments to develop large airports will lead to higher average costs. The Tobit regression on the estimated DEA scores shows that efficiency is positively related with the so—called hub premium (i.e. an airline dominates an airport) and with privatization, and it is negatively affected by military activities and season effects. Hence we suggest that airport’s privatization, incentives to invest in large airports (which are close to saturation of their capacity) and development plans to improve the activities in domestic and regional airports may form the benchmarks of air transportation policy in Italy at least in the short—run.