Efficiency Analysis of the Nigerian Airports: an Application of Dea-Bcc Model
Total Page:16
File Type:pdf, Size:1020Kb
EFFICIENCY ANALYSIS OF THE NIGERIAN AIRPORTS: AN APPLICATION OF DEA-BCC MODEL Obioma R. Nwaogbe Innocent C. Ogwude Callistust C. Ibe Dept. of Transport Management Dept. of Transport Management Dept. of Transport Management Federal University of Technology Federal University of Technology Federal University of Technology Minna, Nigeria. Owerri, Nigeria. Owerri, Nigeria. [email protected] [email protected] [email protected] Abstract The increase in international and domestic movement of passengers and cargos have made the air transport business more especially airports to be more busy in terms of paseenger and aircraft traffic. The aim of this study is to evaluate the airport efficiency performance in Nigeria using DEA-BCC model approch. Non parametric method of production frontier approach were used to analyse 30 airports panel data of the study period from 2003- 2013 in relation with the airport multiple inputs (terminal capacity, runway dimension, number of employees, total assets and total cost) and outputs (passenger throughputs and aircraft movement). The result shows that there is high significant relationship between some inputs (total assets, runway dimension and employees) and the outputs. The efficiency scores of the various airports are determined from the output-orientation analysis. The result also shows that hub airport, commercial/large city airport and private airport are the ones that are productive and efficient. Finally, policy implication on how the inputs are to be improved to make the airports that are not efficient to be efficient. Keywords airport, efficiency, productivity, DEA productive efficient in Nigeria. The airports are going to be 1. Introduction ranked based on the efficiency scores, recommendations on possible improvements on the operations will be made to Aviation industry is one of the major important sectors in the enhance more productivity and efficiency. Furthermore, the transportation industry in the world. Its continuous model will enable us observe the airports that are operating on development and technological service improvement makes the scale of vairble return to scale. After the analysis, it shows the sector to be a major contributor to the modern and the the airports under increasing return to scale, decreasing return global standard of advanced development in the to scalle and constant return to scale. transportation sector. The growth of this sector cannot be compared to any other major transport sector due to its sophisticated technological equipment and continuous 1.2. Problem Statement innovation in the sector because of its haul of vehicle (Aircraft) The growth in air travel is outstripping the capacity of airport that it uses as a carrying system. With the help of this sector and air traffic control system. That has resulted in increasing much has being achieved throughout the world in terms of congestion and delay in air transport operations in Nigeria. The economic development, tourism, connectivity, logistics and consistent growth of air traffic and passenger demand is supply chain activities. The demand for transport services has a causing the operational movements at hub airports to greater influence on the air transport sector in so many approach their maximum capacities. With this growth, delays countries and their economy at large. It acts as catalyst to to aircrafts and passengers are increasing and safety is passenger movement, cargo, domestic and international in the becoming a major problem. In Nigeria, statistics have shown air transport market (Nwaogbe et al., 2013). The high growth that in the beginning of the millennium year, there has been an rate in Nigeria population and high traffic growth of domestic increase in air transportation traffic; more especially in the and international demand due to high economic development areas of passengers’ departure and arrivals, cargo and aircraft of the country has a big effect on the air transport sector. This movement. Much attention has to be focused on the Nigeria study will be of great help to the aviation sector in the Nigeria. airport system by the government, management of the airports Furthermore various airport infrastructural challenges and (FAAN) and agencies on how to assess the performance of sophisticated equipment for safety and security, traffic various airports to meet international standards. The interest congestions, delays of flight has cause a heavy deterioration at in assessment of productivity efficiency is somewhat recent. In the airports. the late 20th century, monitoring and comparison of airports productive efficiency was not a common practice in the air 1.1. Objective of the Study transport industry. Due to deregulation, the aviation industry has moved from being entirely public utilities to private and The objective of theis study is to evaluate the performance of commercial utilities. Therefore, with airport privatization and the airports in Nigeria using Banker Charnes Cooper model commercialization, a lot of competition has risen among (BCC-model) to examine amongst the airports that are 28 airports thus resulting in a high market interest in performance the views of experts. These findings indicate that there are comparison (Graham, 2003). Due to the high rate of increase in some net benefits for airlines and air navigation service demand for air transport services over the last few decades, providers who use AHP, but not for airports. Lai (2013) this has led to a higher level of competitions among Nigerian conducted a study on the relationship between airport airports and also those of the neighboring countries of West privatisation and airport efficiency using AHP and DEA models. African sub-region. In order to handle the increasing level of In his study, he focused on the European and the Asia-pacific competition, benchmarking has become an important source region, on how to improve airport efficiency, such as investing of weakness determination at airports that are faced with in the infrastructure and privatising airport ownership or increasing traffic demand (Lai, 2013). governance. The results for each of the different analysis models/techniques show that there is no statistically significant Other points worth mentioning when studying airport relationship between airport ownership and efficiency. productivity and efficiency are the average delay period of an aircraft in the airport and quality of service provided by the Gitto & Mancuso (2012) conducted a study on bootstrapping airport. Overall performance of an airport is adversely affected the Malmquist indexes’ for Italian airports using data by delays which reduce passengers travel demand over a short envelopment analysis to assess the operational performance of or long run scenario due to the bad reputation of an airport. 28 Italian airports during the period of 2000 to 2006. From Delay in an airport is closely associated with terminal capacity their research, they use recent development in bootstrapping of the airport and reliability of air traffic control system (Adler technique to connect total factor productivity, estimates for & Berchman, 2001). The quality of service in airports consists bias and assess the uncertainty surrounding the estimates. of the service offered to airlines and various facilities offered From their study, they observed that the Italian airport sector for passengers. The quality of ground handling services also experiences a significant technological regression, with few play an important role in the overall efficiency score of an airports achieved an increase or enhance airport productivity airport (Ülkü, 2014). which led to improvements in the efficiency of the airports. Moreover, the bootstrap approach in the DEA context has 1.3. Motivations of the Study been widely adopted in the past few years (Assaf, 2010; Curi et This study will make a heavy contribution that will enable the al., 2010). In 2011, Assaf also used the Malmquist government and the stakeholders of the aviation sector and bootstrapped combined model to assess the extent of the management of the Federal Airport Authority of Nigeria to productivity, efficiency, scale and technological changes at the identify the airports that are efficient and productive. The major Australian airports. Moreso, in 2012, there was a new study will be very useful in assessing, monitoring, managing model that was applied to evaluate airport efficiency; the and planning all other operational activities at various airports model is known as Bayesian dynamic frontier model. The in the country. The assessment allows or helps the airports model was used by Assaf et al. (2012) to assess UK airport directors of operations, managers of operation to benchmark efficiency. Assaf & Gillen (2012) adopted the model and their operational performance of the airport. Furthermore, the combine it with SFA to compare the efficiency of 73 efficiency performance of airport operations can be achieved international airports. Finally, combinations of models and by various competition amongst the market industry by other approaches have been but in a limited publications (e.g. complying with the quality of service and level of service of the Pels et al. 2001; Martin & Roman, 2006 & Yang, 2010). airports. Therefore, estimation of efficiency performance of Ferreira et al. (2010) contend that DEA model attempts to airports can be enhanced by using various measures of the exploit the relationship between the outputs and inputs, quality service to