Evaluating airport and seaport privatization: a synthesis of the effects of the forms of ownership on performance

Abstract

Assessing the effects of ownership structure on efficiency has received considerable attention in the aviation management literature. Commercialization has been widely employed both in developing and developed countries as a means of increasing operational efficiency. Since airports and seaports are operationally similar, this paper examines the literature and methods used to assess the effects of privatization in both types of infrastructure. We observe that the impact of privatization on performance depends not only on the degree of privatization but on the competition in the market. Following a 4-level specification commonly employed in the seaport literature that captures degrees of privatization, we estimate a stochastic frontier model for airport efficiency as a function of ownership. We conclude that airport authorities in the United States are equally as efficient as fully privatized airports elsewhere, due to a high degree of competition and fiscal independence from the other governmental entities. Additionally, while privatization may be an effective mechanism of introducing corporatization into infrastructures that are characterized by poor competition and direct government control, the airport authority appears to achieve the benefits of privatization in operation without actual transfer of ownership.