Airport charges and marginal cost for Spanish airports before the …ieb.ub.edu › wp-content ›...

Airport charges and marginal cost for Spanish airportsbefore the process of partial privatization

Soraya Hidalgo Valeriano Martínez Ramón Núñez-SánchezUniversidad de Cantabria

3rd Meeting in Transport Economics and InfrastructureUniversitat de Barcelona

January 18th, 2019

Ramón Núñez-Sánchez (UC) January 18th, 2019 1 / 16

Structure

Introduction

Pricing in Spanish airports for the period 2009-2014

Econometric speci�cation

Estimation and results

Conclusions and policy implications


Introduction

Transport policies have had to face new challenges due to the rapidevolution of airport and airline sectors in the last years.

Airport pricing is considered as one of the most relevant issues forpolicy makers and academia. Some relevant topics:

airport regulationcongestion pricingpricing of airport concession services

Traditionally, aeronautical airport charges can divided into:

aircraft-weight (per-�ight) related chargesper passenger-related charges

According both theoretical and empirical literature, the structure ofaeronautical airport revenues is not neutral. Some examples:

Passenger-related charges can mitigate carrier frequency reductions atuncongested airports (Czerny et al., 2017).Existence of substitution e¤ects in the price setting of landing andterminal charges (Choo, 2014).


Introduction

Transport policies have had to face new challenges due to the rapidevolution of airport and airline sectors in the last years.Airport pricing is considered as one of the most relevant issues forpolicy makers and academia. Some relevant topics:







Introduction


airport regulation

congestion pricingpricing of airport concession services






Introduction


airport regulationcongestion pricing

pricing of airport concession services






Introduction








Introduction








Introduction



Traditionally, aeronautical airport charges can divided into:aircraft-weight (per-�ight) related charges

per passenger-related charges




Introduction



Traditionally, aeronautical airport charges can divided into:aircraft-weight (per-�ight) related chargesper passenger-related charges




Introduction







Introduction





Passenger-related charges can mitigate carrier frequency reductions atuncongested airports (Czerny et al., 2017).

Existence of substitution e¤ects in the price setting of landing andterminal charges (Choo, 2014).


Introduction







Introduction

Our paper analyses marginal costs and aeronautical airport chargesfor the Spanish airports in a pre-privatization period (2009-2014).

�exible short-run cost function system to estimate marginal costs forpassengers and aircraft operations

Contribution to the literature:

use of maximum take-o¤ weight (MTOW) instead of air transportmovement (ATM) as output variablepassengers and aircraft operations are considered endogenous(Bottasso & Conti, 2017)


Introduction






Introduction






Introduction




use of maximum take-o¤ weight (MTOW) instead of air transportmovement (ATM) as output variable

passengers and aircraft operations are considered endogenous(Bottasso & Conti, 2017)


Introduction







Group Airports

GROUP I Adolfo Suárez Madrid-Barajas (MAD); Barcelona-El Prat (BCN)GROUP II Alicante (ALC); Gran Canaria (LPA); Tenerife Sur (TFS);

Málaga-Costa del Sol (AGP); Palma de Mallorca (PMI)GROUP III Bilbao (BIO); Fuerteventura (FUE); Girona (GRO); Ibiza (IBZ);

Lanzarote (ACE); Menorca (MAH); Santiago (SCQ); Sevilla (SVQ);Tenerife Norte (TFN); Valencia (VLC)

GROUP IV Almería (LEI); Asturias (OVD); A Coruña (LCG); FGL Granada-Jaén (GRX);Jerez (XRY); La Palma (SPC); Murcia (MUV); Reus (REU);Santander (SDR); Vigo (VGO); Zaragoza (ZAZ)

GROUP V Albacete (ABC); Badajoz (BJZ); Burgos (RGS);Córdoba (ODB); El Hierro (VDE);Huesca-Pirineos (HSK); La Gomera (GMZ); León (LEN); Logroño (RJL);Melilla (MLN); Salamanca (SLM); San Sebastián (EAS); Pamplona (PNA);Vitoria (VIT); Valladolid (VLL)



Type of revenue Million euros Subtotal percentage Total percentageAeronautical revenues

Landing 509.53 34.1 22.3Aircraft parking 19.63 1.3 0.9Passenger service 629.91 42.1 27.5Passenger security 202.28 13.5 8.8

Cargo 10.52 0.7 0.5Other 123.37 8.3 5.3Subtotal 1,495.24 100 65.3

Non-aeronautical revenuesSubtotal 179.66 100 7.8

Commercial revenuesSubtotal 614 100 26.8TOTAL 2,289.03 100



We consider a multiproduct translog variable cost function withvariables deviated from their geometric mean:

lnVC it = α0+J

∑j=1

αj lnwjit+M

∑m=1

βm lnQmit+12

J

∑j=1

J

∑k=1

γjk lnwjit lnwkit

+12

M

∑m=1

M

∑n=1

δmn lnQmit lnQnit+M

∑m=1

J

∑j=1

λmj lnQmit lnwjit

+θk ln kit+12

θkk (ln kit )2 +

J

∑j=1

θjk ln kit lnwjit

+M

∑m=1

θmk ln kit lnQmit+uit



Then, variable cost elasticities for each output are obtained:

εVCmit =

βm +

M

∑n=1

δmn lnQnit +J

∑j=1

λmj lnwjit + θmk ln kit

!

Considering quasi-�xed input costs, a short-run total cost (STC ) canbe derived and their corresponding cost elasticities:

STCit = VCit + ritkit

εSTCmit = εVCmitVCitSTCit

Finally, short-run economies of capacity utilization (SrSE ) arecalculated:

SrSEit =VCit

∑m

∂VC∂Qm

Qmit=

1

∑m

εVCmit




εVCmit =

βm +

M

∑n=1

δmn lnQnit +J

∑j=1


!





SrSEit =VCit

∑m

∂VC∂Qm

Qmit=

1

∑m

εVCmit




εVCmit =

βm +

M

∑n=1

δmn lnQnit +J

∑j=1


!





SrSEit =VCit

∑m

∂VC∂Qm

Qmit=

1

∑m

εVCmit



Descriptive statistics of variablesVariable Units Mean Std. Dev. Min MaxVariable cost (vc) Mill. e (def2001) 38.65 73.81 2.08 422.93Passengers (pax) Passengers 5,527,134 9,661,990 6,912 4.99E+07Maximum take-o¤ weight (mtow) Tons 3,097,929 6,085,634 18,482 3.35E+07Terminal surface (K) Square meters 173.39 421.66 5.9 3020.87Labor price (pl) e (def2001) 37,674 3,949 32,380 48,683Intermediate consumption proces (pci) Index 126.6 11.1 96 131Non-aeronautical revenue share (percom) Percentage 27.7 6.1 6 48.6



First order coe¢ cients of the short-run variable cost functionSpeci�cation 1 Speci�cation 2 Speci�cation 3Coe¢ c. Coe¢ c. Coe¢ c.

cons 0.666 *** 1.059 *** 0.755 ***pl 0.423 *** 0.425 *** 0.425 ***pci 0.577 *** 0.575 *** 0.575 ***K 0 0.002 0.001pax 0.319 *** 0.297 *** 0.369 ***mtow 0.173 *** 0.125 ** 0.125 **g2 -0.606 *** -0.665 *** -0.582 ***g3 -0.985 *** -1.112 *** -0.924 ***g4 -1.111 *** -1.34 *** -1.039 ***g5 -1.155 *** -1.468 *** -1.065 ***percom 0.091 0.238 0.243t -0.031 *** -0.029 ***Time e¤. Yes No NoN 210 210 210



Estimates of short-run total cost elasticities and economies of capcityutilization

Estimated cost elasticity Economies ofpassengers mtow capcity ut.

1 0.373 *** 0.056 1.413 ***2 0.29 *** 0.156 ** 1.546 ***3 0.264 *** 0.128 *** 1.725 ***4 0.231 *** 0.1 ** 2.01 ***5 0.229 *** 0.076 2.664 ***

Insular 0.231 *** 0.159 *** 1.778 ***



0

5

10

15

20

EUR

2009 2010 2011 2012 2013 2014

Pax MC Pax f ee

GROUP 1

0

1

2

3

4

5

6

EUR

2009 2010 2011 2012 2013 2014

Pax MC Pax f ee

GROUP 2

0

1

2

3

4

5

EUR

2009 2010 2011 2012 2013 2014

Pax MC Pax f ee

GROUP 3

0

1

2

3

4

5

6

EUR

2009 2010 2011 2012 2013 2014

Pax MC Pax f ee

GROUP 4

0

5

10

15

20

EUR

2009 2010 2011 2012 2013 2014

Pax MC Pax f ee

GROUP 5

0

1

2

3

4

5

6

EUR

2009 2010 2011 2012 2013 2014

Pax MC Pax f ee

INSULAR

Figure: Evolution of per-passenger based airport charges and marginal costs



0

2

4

6

8

EUR

2009 2010 2011 2012 2013 2014

Mt ow MC Mt ow f ee

GROUP 1

0

2

4

6

8

EUR

2009 2010 2011 2012 2013 2014

Mt ow MC Mt ow f ee

GROUP 2

0

2

4

6

8

EUR

2009 2010 2011 2012 2013 2014

Mt ow MC Mt ow f ee

GROUP 3

0

2

4

6

8

EUR

2009 2010 2011 2012 2013 2014

Mt ow MC Mt ow f ee

GROUP 4

0

2

4

6

8

EUR

2009 2010 2011 2012 2013 2014

Mt ow MC Mt ow f ee

GROUP 5

0

2

4

6

8

EUR

2009 2010 2011 2012 2013 2014

Mt ow MC Mt ow f ee

INSULAR

Figure: Evolution of per-�ight based airport charges and marginal costs


Conclusions

Most relevant �ndings:

Existence of non-neutral technological change for the period from2009 until 2014.

maybe related to institutional and regulatory changes with regard tothe di¤erent privatization proposals for the Spanish airport system.

Some degree of short-run capital disequilibrium motivated by theovercapitalization of Spanish airports.

Airport charges do not follow the evolution of marginal costs for thisperiod.

Aeronautical airport charges are set above the short-run marginal costswith the exception for the smallest airports.


Conclusions








Conclusions








Conclusions








Conclusions








Conclusions

Future lines of research:

Inclusion of commercial activities in the empirical analysis followingtwo-sided market literature.

Consider vertical relations between airlines and aiports.


Conclusions

Future lines of research:

Inclusion of commercial activities in the empirical analysis followingtwo-sided market literature.

Consider vertical relations between airlines and aiports.


Moltes gràcies per la seva atenció


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