sustainability

Article
Measuring and Explaining Airport Efficiency and
Sustainability: Evidence from Italy
Fabio Carlucci 1, * ID
, Andrea Cirà 2 and Paolo Coccorese 1 ID

1 Department of Economics and Statistics, University of Salerno, Via Giovanni Paolo II 132,
84084 Fisciano (SA), Italy; [email protected]
2 Department of Economics, University of Messina, Piazza Pugliatti, 1, 98122 Messina, Italy; [email protected]
* Correspondence: [email protected]; Tel.: +39-089-962-836

Received: 12 January 2018; Accepted: 1 February 2018; Published: 4 February 2018

Abstract: From an environmental point of view, it is widely recognized in economic literature that an
efficient management of regional airports produces positive effects both for congestion reduction in
the larger airports and for better use of existing infrastructures. Regional airports generally suffer
from economic vulnerabilities because of scarcity of traffic volume; besides, their small catchment
areas often determine low cash flow levels. As a result, significant problems of economic sustainability
arise. In this context, airport infrastructure providers have the incentive to hide failures in their
strategic decisions, justifying the low share of cost recovery through market characteristics. By means
of the DEA (Data Envelopment Analysis) method this paper analyses overall technical, pure technical,
and scale efficiency of 34 Italian airports in the period 2006–2016 in order to investigate how a number
of factors impact on the efficiency and economic sustainability of regional airports. Our findings
reveal that airport size, presence of low-cost carriers and cargo traffic have a significant influence
on the technical and scale efficiency of Italian airports. In other words, air transport privatization
and deregulation can positively affect regional airport efficiency and sustainability. This is to say
that the market mechanism is a useful tool in achieving regional airport sustainability even if the
empirical analysis of the effects of privatization and deregulation is recommended for evaluating
such political programs.

Keywords: air transport sustainability; airports efficiency; DEA method; Italy

1. Introduction
Aviation can be considered essential within the ongoing process of (cultural, social and economic)
globalization, also from a sustainability point of view [1]. Actually, any increase in economic activity,
industrial production or trade relations unavoidably causes greater need for transport [2] and an
increasing level of externalities, such as air pollution [3,4].
There are many studies that have focused on airport management efficiency, but they have seldom
analyzed the correlation between regional airport sustainability and airport management efficiency.
Through studying the connection between the catchment area of Italian regional airports and
their management quality, in this paper we try to ascertain when regional airports are economically
unsustainable due to problems related to their catchment area dimension and when this happens
because of management deficiencies. In order to obtain this result, we use the DEA method that
appears particularly adequate because it allows the obtaining of scores measuring overall technical,
pure technical, and scale efficiency.
In the European Union air transport system currently plays a fundamental economic role,
particularly after that the three “deregulation packages” have become effective. Until that period,
the aviation market was characterized by the supremacy of the domestic carriers, or “flag carriers”,

Sustainability 2018, 10, 400; doi:10.3390/su10020400 www.mdpi.com/journal/sustainability

Sustainability 2018, 10, 400 2 of 17

and by bilateral agreements between nations. Over the years there has been a growing need of
strengthening the market mechanism in the air transport sector, since up to that moment it was
regarded as overregulated and with a high incidence of public monopolies. Transport deregulation and
privatization, traditionally, has been thought of as something that should lower the level of pollution as
a consequence of propensity to innovate of private firms [5,6] and of an improvement in fuel efficiency
and load factors [7].
Moreover, the recent wave of deregulation and liberalization has determined an increase of airline
competition, which translated into higher competition among airports; therefore, it appears important
to assess the operational performance of airports, especially their efficiency. As a matter of fact, airport
benchmarking might be useful for comparing the various structures and gauge their level of efficiency,
with the additional aim of driving them toward the “best practices”.
The deregulation process in Europe has followed four steps [8–10], which have led to a unique
domestic market throughout the countries. The last step has taken place in 2008 when, due to the
Regulation (EC) No. 1008/2008, which reviewed the regulatory rules of 1992, European Institutions
have accomplished the process of liberalization, so that EU routes are now “freely” reserved to the
community air carriers. Actually, henceforward European countries are compelled to accept the entry
of all “authorized” carriers into their airspace.
This situation has clearly led to phenomena such as increased competition among carriers,
decreased average fares, increased frequency, and new route services [11,12]. Airlines have become
more “footloose”, having a greater freedom to choose where they fly to and from, and in general to set
fares, frequencies, capacities and routes according to commercial consideration [12]. This has been
quite important for providing opportunities for airports to grow through attracting new routes but
also challenging the existing ones (actually, around 2500 new routes were opened in 2011). Moreover,
air transport produces relevant sustainability issues in both economic and environmental terms, even if
our analysis is focused on the economics aspects and more specifically on the positive effects produced
by the European policy of transports privatization. It is widely recognized in economic literature that
an efficient management of regional airports produces positive effects on the environment both for the
congestion reduction in the bigger airports and for a better use of existing infrastructures reducing soil
consumption [13,14]. One of the main results of the deregulation process has been the entrance and the
development of low-cost carriers (LCCs). These new players have greatly stimulated a part of demand,
which was “neglected” by bigger carriers. Highly price sensitive customers are willing to receive a low
profile service (‘no frills’) so, thanks to an aggressive pricing policy, LCCs have attracted millions of
passengers. They have also developed a network called “point-to-point”, which indicates a connection
of pairs of destinations with a high frequency gain. This strategy, by maximizing the number of
passengers boarded per way, leads to reduced congestion and increased environmental performance
of the whole system [15]. By doing so, LCCs have focused especially on secondary airports, due to the
lower level of charges, increasing the chance for competition among airports. It is important to notice
that LCCs played a key role in the aviation market because they have changed the traditional business
relationship between airports and airlines. Particularly, the capability of LCCs to move high volumes
of passengers has created an asymmetry between airlines and airports, with more market power in the
hands of the airlines [16,17].
In Europe airport industry was traditionally characterized by public ownership and national
requirements [18]. As soon as domestic air transport market was liberalized, a number of governments
in Europe began to transfer the ownership or operation of larger airports to the private sector.
Many smaller airports in Europe are still publicly owned, but the majority is now operated by
corporatized entities. From a theoretical perspective, airport privatizations improve the efficient use of
infrastructures, enhancing long-term sustainability [19].
For decades, major airports around the world have predominantly served passenger markets,
thus their operations and infrastructure were designed primarily to meet the needs of people, with
their remaining capacity serving air cargo. Such airports are also referred to as “gateway airports” [20].
Sustainability 2018, 10, 400 3 of 17

This phenomenon can be attributed to the fact that the volume of air cargo is not sufficiently large to
reach a critical mass. To a great extent, air cargo plays a complementary role for passengers, filling the
excess capacity of aircraft.
However, the recent growth of global air cargo traffic has instilled great concern in policy makers
and airport planners. This feature is interesting also when examining sustainability and efficiency
of European airports, and the Italian ones among them. Particularly, we now aim at evaluating the
impact of relevant external factors, such as the size of the airport and the presence of LCCs, on airports’
efficiency and environmental sustainability [21,22].
In the recent years, privatization and restructuring processes have affected also the Italian airport
industry, with likely spillovers on their overall efficiency. Within this dynamic context, in our opinion
it is worthwhile to assess whether local airport characteristics have also had a role in influencing
efficiency. Actually, the latter is likely to depend not only on exogenous features on which airport
management has a limited direct control (unless they act on local public policy makers and/or vectors
in order to attract new demand), but also on factors that can be directly handled by local managers,
particularly those pertaining the size and the business mix.
Unlike previous papers regarding Italian airports, we consider the effect of cargo traffic on airports’
efficiency and sustainability, which is expected to exhibit a higher factor productivity and a lower
environmental impact because “handling cargo is capital intensive and therefore more productive than
handling passengers” [23]. However, we take into account also the impact of other important external
factors, particularly the size of airport and the presence of LCCs.
The producers performances are often affected by external or environmental factors which may
affect the production process—being responsible for differences in the performances of the data
management units (DMUs)—but, unlike the inputs and the outputs, they are not under the control
of production units: we refer mainly to quality indicators, regulatory constraints, market conduct
(competitive vs. monopolistic), type of ownership (private-public or domestic-foreign), environmental
features. Such factors can be however included in a model as exogenous variables, thus helping to
explain the efficiency differentials and even to improve policymaking.
The paper is structured as follows. After introduction, in Section 2 we give a concise review
of literature dealing with both the measurement of airport efficiency and the assessment of its
determinants. In Section 3 we present the first stage of our procedure and, by means of the DEA
(Data Envelopment Analysis) method, estimate and examine the scores measuring overall technical,
pure technical, and scale efficiency of Italian airports over the period 2006–2016. In Section 4, we make
use of a Tobit model and regress such efficiency scores on three explanatory variables for the same
airports: airport size, the share of LCCs passenger, and the share of cargo traffic, also providing some
discussion on the results.

2. A Brief Literature Review

2.1. DEA Studies in the Air Transport

Airport privatization, globalization and increased competition have generated business pressures
on operating firms. This has wakened interest in performance benchmarking and pushed airports
to place more emphasis on quality [24]. The airport industry is varied and heterogeneous, with a
high degree of quality differentiation, heterogeneous ownership and regulatory structures, different
mixes of services and operating characteristics [25], hence assessing and comparing the performance
of airports is a complex task.
Nonetheless, due to the increasing strategic and economic importance of airport infrastructures,
the analysis of airports efficiency has become crucial [26], because it allows airlines to select the
more efficient airports, municipalities to understand their capacity to attract business and tourists,
and governments to optimally allocate resources to airport improvement programs (rather than
being subject to lobbies and political pressures) [27]. Therefore, in the very recent years measuring
Sustainability 2018, 10, 400 4 of 17

and benchmarking of airports have captured an increasing interest among practitioners, regulators
and academics.
Studies assessing the performance and sustainability of transportation infrastructures
management can be classified into two groups according to the technique applied. The first refers
to parametric methods, such as stochastic frontier analysis (SFA), which measure efficiency through
econometric techniques [10,28–33]. The second comprises investigations applying the non-parametric
methodology called DEA [13,34–37]. Some other papers compare the DEA model with the SFA
model [38,39].
Focusing on DEA, it measures the relative efficiency of decision-making units on the basis of
multiple inputs and outputs. The efficiency of a unit is defined as the weighted sum of its outputs
divided by a weighted sum of its inputs. As Despotis (2005) [40] underlines, the weights for inputs and
outputs are estimated by a linear programming so as to maximize the relative efficiency of each unit.
Farrell (1957) [41] introduced the concept of “best practice frontier”, which delineates the technological
limits of what a country can achieve with a given level of resources. The distance from the frontier can
be used as a performance indicator [42].
DEA is a methodology directed to frontiers and proves particularly suitable for uncovering
relationships that remain hidden from other methodologies [43]. The initial DEA model was proposed
in a seminal paper by Charnes et al. (1978) [44], who describe the DEA methodology as a “mathematical
programming model applied to observed data that provides a new way of obtaining empirical estimates
of external relationships such as the production functions and/or efficiency production possibility
surfaces that are the cornerstones of modern economics”. Since then, numerous applications employing
the DEA methodology have been proposed, and they involve several contexts. Actually, it is designed
to evaluate data management units (DMUs) that use multiple inputs to produce multiple outputs
without a clear identification of the relation between them, but it has then progressed throughout a
variety of formulations and applications to other kinds of industries.
We have decided to employ the DEA method just because it can be applied to scenarios where the
data cannot be strictly interpreted as inputs or outputs and/or there is no direct functional relationship
between the variables. Starting from the pioneer work of Gillen and Lall (1997) [45], there has been
a steady growth of studies applying DEA methods in the airport industry, especially from 2008.
Particularly, there has been an average of about two papers published every year during the period
1997–2007, while in the following years such number has more than doubled. Although few in number,
they suggest a growing research interest in the air transport economics and management field. Among
the most impactful papers, we recall those by Martín and Roman (2001, 2007) [46,47], Barros and Dieke
(2007, 2008) [27,48], Barros et al. (2012, 2013) [49], Curi et al. (2010, 2011) [35,50]. Interesting literature
reviews on DEA studies of airport efficiency are offered by Lam et al. (2009) [51] and Adler et al.
(2013) [13].
Up to 2007, there were few papers concentrating on European airports. None of them considered
the Italian context. However, from 2007 it is possible to find some studies that have focused on Italy
(Gitto and Mancuso, 2012, [36]). As far as the Italian case is concerned, a number of DEA-based
researches have appeared recently, but with mixed results. Malighetti et al. (2007) [52] have examined
the efficiency and productivity variations of 34 Italian airports for the years 2005 and 2006. Low average
efficiencies have been found with evidence of improved performance among airports larger than
5 millions passengers. Further, hub premiums and the privatization process have been considered as
positive drivers of performance, while military activities and seasonality effects seem to operate as
obstacles. The authors have also studied business scale inefficiency, finding that Milano Malpensa and
Roma Fiumicino airports work under decreasing returns to scale, while other airports with less than
5 millions passengers operate with increasing returns to scale.
Barros and Dieke (2008) [48] have analyzed 31 Italian airports during the period 2001–2003.
They use the Simar and Wilson methodology, and find high values of efficiency, which are positively
affected by factors such as size and private management, and also high levels of workload units (WLU).
Sustainability 2018, 10, 400 5 of 17

Their results differ from those of Malighetti et al. (2007), as they find that most airports in their sample
have operated under constant returns to scale. Curi et al. (2011) [35] find low levels of efficiency among
Italian airports, in line with Malighetti et al. (2007) [52]. A previous paper by Curi et al. (2010) [50] has
measured the efficiency of 18 Italian airports during the period 2000–2004, separating the efficiency
related to ability to manage airside activities (operational) from that related to the management of all
business activities (financial). They have found that airport dimension does not allow for operational
efficiency advantage, rather it allows for financial efficiency advantage of hubs and financial efficiency
disadvantages of smallest airports.

2.2. Studies on the Determinants of Airport Efficiency

Previous research shows that airport characteristics (hub status, traffic structure, outsourcing
policies, regulatory procedures, ownership structure) may all contribute to airport efficiency [53].
Regarding the econometric approach to the second stage (i.e., after estimating efficiency), past airport
studies have employed simple ordinary least squares, Tobit regressions and truncated regressions [30].
A lively debate in the literature discusses particularly the most appropriate second-stage regression
model to be applied when using DEA efficiency estimates. While Simar and Wilson (2007) [54] argue
that truncated regression, combined with bootstrapping as a re-sampling technique, is able to overcome
the unknown serial correlation that can affect the two-stage analysis, Banker and Natarajan (2008) [55]
conclude that simple ordinary least squares (OLS), maximum likelihood estimation or Tobit regression
dominate the other alternatives. Hoff (2007) [56] compares different approaches to modeling DEA
efficiency scores against exogenous variables for the second-stage estimation, and concludes that
the Tobit approach is the best option. Such method has been used, among others, by Latruffe et al.
(2004) [57] and Bravo-Ureta et al. (2007) [58]. It is recommended especially because first-stage efficiency
scores usually lie between zero and one.
For all the above reasons, in the second stage of our analysis we use the Tobit regression,
a non-linear method that provides consistent estimators through maximum likelihood techniques.
The Tobit model has been already used in the airport literature as a second-stage investigation following
the estimated DEA efficiency scores [59].

3. First Step: Estimating Efficiency Scores through DEA Analysis

3.1. The Model

The economic theory underlying efficiency analysis is based on Debreu (1951) [60] and Farrell
(1957) [41], who made the first efforts on measuring the efficiencies of a set of observed production
units. Within this context, the DEA original model, introduced by Charnes et al. (1978) [44], represents
an improvement on those seminal works.
The Data Envelopment Analysis is also the basic method that has been used in order to assess
the performance of transportation infrastructure management. Originally, the development of DEA
aimed at solving problems that were hard to deal with other approaches. This difficulty was due to
the complex (frequently unknown) nature of the relations among the multiple inputs and outputs
involved in the activities [43].
In DEA, the basic premise is homogeneity, that is, the DMUs must perform similar activities and
produce comparable products and/or similar services, so that it can be set as a common range of
products [61].
Each DMU’s score is individually optimized through mono-objective linear programming,
comparing the resources used (inputs) and the quantities produced (outputs) to the levels of other
units. The result is the construction of an efficient frontier. The DMUs lying on it are efficient (score of
100%) while the others are inefficient (score of less than 100%).
Besides efficiency scores, the envelope formulation of DEA models provides targets and a reference
set for the inefficient DMUs. The targets are the levels that the inputs and outputs of those inefficient
Sustainability 2018, 10, 400 6 of 17

units must achieve in order to be efficient. The reference set represents the efficient DMUs (benchmarks),
i.e., those that will be used as references for good management practices. A linear combination of these
benchmarks provides the targets for each inefficient DMU. Such targets are, in most cases, virtual,
as they do not characterize a real efficient DMU.
Depending on the industry characteristics, there are different DEA models: input-oriented,
output-oriented, or both. The input orientation focuses on proportional decrease of the input vector;
the output orientation adjusts the proportional increase of the output vector; the output/input
orientation does not discriminate the importance of possible increase of output or decrease of input.
In the air transport sector, the output-oriented model has been considered as more suitable, due to
the fact that it is not possible to recover investments in infrastructure that normally are made well
in advance. On the contrary, the goal of the manager is to expand the demand as much as possible
and to use airport facilities as intensively as possible, since production factors are fixed or semi-fixed.
In terms of returns to scale model, there are three basic DEA models: constant returns to scale (CRS),
variable returns to scale (VRS), and additive. They can be used to assess which of DMUs determine
the frontier of the envelopment surface. Units that do not lie on the frontier are inefficient, and the
measurement of the grade of inefficiency is determined by the selection of the model.
Our paper focuses on both constant and variable returns to scale models, while it makes use of
an output-oriented approach in order to analyze the financial and operating performance of Italian
airports. Particularly, for the jth airport (out of n airports) the output-oriented technical efficiency
under constant return to scale (CRS) is obtained by solving the following linear programming problem:

max θ jCRS subject to : θYj ≤ YλX j ≥ Xλλ ≥ 0.

θ CRS
j ,λ

where: X and Y are the input and output vectors, respectively; θ CRS = 1/θ j CRS is the technical efficiency
of airport j under CRS; and λ is a n × 1 vector of weights. The non-negative weights λ measure the
contribution of the selected efficient airports to define a point of reference for the inefficient jth airport.
In general, 0 ≤ θ j CRS ≤ 1, where θ j CRS = 1 if the airport is producing on the (production) frontier and
hence is technically efficient. When θ j CRS < 1, the airport is technically inefficient.
For the case of variable returns to scale, technical efficiency θ j VRS is obtained by adding the
convexity constraint Σλj = 1 into the maximization problem.

3.2. Data
We employ data for a cross section of Italian airports that differ in ownership, financing and
operational characteristics. In particular, our sample considers all 34 Italian airports certified by ENAC
(the Italian Civil Aviation Authority) for the period 2006–2016. Such time interval considers the very
last deregulation steps linked to the Regulation (EC) No. 1008/2008, but it especially takes into account
the revitalization of air traffic occurred after 2011 (i.e., after the attack on the Twin Towers). Table 1
portrays some characteristics of Italian airports for 2016.
Some interesting insights can be drawn from its data. First, for the workload units (WLU) and the
total number of passengers the standard deviation is higher than the mean, which indicates that the
sample is not very homogeneous. This is largely due to the presence of both small and large airports
in the sample, a characteristic that reflects the local population density. Second, the lowest ratios of
the rate of turnover of invested capital are found for small airports, most of which are managed by a
capital company totally in public hands. The highest values belong to the airports of Genova (where
the rate of change is greater than 1), Pantelleria, Alghero, Lamezia Terme and Trieste. Such airports are
mostly managed by partially privatized company, which foresees that privatized or partially privatized
airports achieve higher levels of efficiency. Third, none of the listed airports is completely privatized:
the majority is characterized by a joint management system (public-private), whereas the remaining
airports, mostly small-sized, are totally public managed.
Sustainability 2018, 10, 400 7 of 17

Table 1. Summary characteristics of Italian airports (year 2016).

TURNOVER OF STATE
PASSENGERS
Workload CAPITAL EMPLOYED MANAGEMENT
No. AIRPORTS (No. of
“WLU” (Euro) (Sales Volume/Invested (100% Public = 1;
Arrival)
Capital) Joint = 0)
1 Alghero 1,343,480 0.75 0 669,035
2 Ancona 540,922 0.10 0 236,607
3 Aosta 0 0 0 0
4 Bari; Brindisi; Foggia; Taranto * 6,709,335 0.16 0 3,291,615
5 Bergamo 12,235,828 0.54 0 3,098,844
6 Bologna 8,036,179 0.30 0 1,912,771
7 Bolzano 6193 0.13 1 4514
8 Cagliari 3,740,848 0.20 0 3,064,706
9 Catania 7,909,248 0.41 0 5,384,838
10 Comiso 459,235 0.26 n.a. ** 394,396
11 Cuneo 131,526 0.31 0 94,031
12 Elba 9548 0.13 0 4502
13 Florence; Pisa * 7,590,186 0.52 0 1,770,875
14 Genoa 1,263,739 1.07 0 687,091
15 Grosseto 2172 0.16 0 250
16 Lamezia Terme 2,525,898 0.76 0 2,035,288
17 Lampedusa 225,936 0.51 1 222,142
18 Milan Linate; Milan Malpensa * 34,589,106 0.46 0 7,591,537
19 Naples 6,837,419 0.67 0 2,352,234
20 Olbia 2,250,668 0.44 0 1,346,747
21 Palermo 5,316,698 0.42 0 4,139,739
22 Pantelleria 140,687 0.92 0 139,922
23 Parma 190,307 0.07 0 129,538
24 Perugia 220,649 0.30 0 42,127
25 Pescara 566,972 0.23 1 254,520
26 Reggio Calabria 479,797 0.21 1 479,437
27 Rome Ciampino; Rome Fiumicino * 48,721,613 0.39 0 12,716,081
28 Salerno 7005 0.08 1 1332
29 Turin 3,953,762 0.52 0 1,998,985
30 Trapani 1,492,256 0.26 0 1,151,525
31 Treviso 2,605,273 0.58 0 779,350
32 Trieste 727,451 0.74 1 447,545
33 Venice 10,039,835 0.23 0 1,303,949
34 Verona; Brescia * 2,851,388 0.32 0 889,158
Mean 5,109,446 - - 1,724,566
Median 1,417,868 - - 733,221
Standard Deviation 10,001,898 - - 2,597,203
* = This Airports are aggregated because they are managed by a single airport managing bodies, so that to our ends
it is better pull together the data concerning the single airports. ** = Not available.

To measure airport productivity through DEA, we need to identify both the outputs that an
airport produce and the inputs used in producing those outputs. In statistical analysis, the most
common airport output measure used is the number of passengers served, as most airports serve
mainly passenger traffic, so in our study we will follow the same line. Air cargo, however, is becoming
more and more important for many airports. Therefore, we consider it as a separate additional output.
While passengers and cargo handling are usually considered as the outputs of airport landside
operations (also considered as final outputs of an airport), aircraft movements are regarded as an
output of airside operations generating revenues for airports in the form of landing and aircraft parking
charges, although they can be also seen as an intermediate outputs (meaning that they carry passengers
and cargo that generate additional revenues in airports’ landside operations). They represent therefore
our third output.
Moreover, airports revenues arise also from concessions, car parking, and many other services that
are not directly related to aeronautical activities in a traditional sense, but nonetheless are becoming
increasingly more important for airports around the world. Thus, additional outputs in our analysis
are the revenues from aeronautical, handling and commercial services. From the above, it is clear that
the airport industry emerges as a paradigmatic case of joint production [62,63].
As for inputs, we consider three categories: labor (measured by the number of employees who
work directly for an airport operator), capital (consisting of the various infrastructure and facilities,
Sustainability 2018, 10, 400 8 of 17

and expressed by the book assets value), and all expenses not directly related to capital and personnel
(which allow us to take into account the effects of airports’ operation strategies with respects to
outsourcing activities on production).
Summing up, for each airport we have information on six output variables: the number of
passengers movements (APM), the ton of cargo (CAR), the yearly number of aircraft movements
(AAM), revenues from aeronautical activities (AR), revenues from handling services (HR), and revenues
from commercial activities (CR). Input variables are: labor costs (LC), invested capital (IC), and other
expenses (OC) (Table 2).

Table 2. Provides some statistics of the variables used in the analysis.

Standard
Variable Description Minimum Maximum Mean
Deviation
INPUTS
LC Labor costs (euro) 6381 182,971,000 15,514,250 30,310,452
IC Invested capital (euro) 829,198 3,170,288,000 217,162,765 536,705,823
OC Other expenses (euro) 220,042 769,102,000 43,154,425 92,879,174
OUTPUTS
APM Passenger movements (number) 50 46,935,875 4,441,731 8,357,661
CAR Cargo (tons) 0 564,132 34,335 93,810
AAM Aircraft movements (number) 8 392,246 43,390 76,917
AR Revenues from aeronautical activities (euro) 177,558 400,779,800 35,222,420 86,551,173
HR Revenues from handling activities (euro) 118,372 267,186,533 23,481,613 57,700,782
CR Revenues from commercial activities (euro) 59 28,181,155 3,792,186 6,458,595
Source: ENAC and AIDA data.

Our choice regarding inputs and outputs meets various DEA requirements. Actually, in the
DEA methodology there exists a direct correlation between the number of variables used (inputs and
outputs) and the number of observations considered “efficient.” As Seiford and Thrall (1990) [64] show,
a low ratio of observations to the number of inputs and outputs weakens the discriminatory power of
DEA models, and most DMUs could be rated efficient. Liebert and Niemeier (2013) [65] suggest that
this should not be considered a flaw of the methodology but rather a direct result of the dimensionality
of the input/output space (m inputs + s outputs), relative to the number of observations (n). In this
case, too few inputs and outputs would reduce the capacity of the DEA to select the efficient airports.
With respect of the minimum set of data points in the evaluation set, in the DEA literature there
are a couple of guidelines. A first rule states that the sample size should be greater than the product of
the number of inputs and outputs, while a second rule declares that the number of observation in the
data set should be at least three times the sum of the number of input and output variables. However,
the size of our sample exceeds the desirable size as suggested by these rules, so we trust we are able to
obtain sufficient discriminatory power.
As before, it comes out that the Italian airports are relatively heterogeneous, being the standard
deviation higher than the average for all the considered variables.

3.3. Empirical Results

The results were obtained using the Open Source DEA software for both the CRS (constant
return to scale) and VRS (variable return to scale) models and following the output-oriented approach
(i.e., we assume that airports aim to maximize the profits resulting from their activity, and try to
determine whether an airport is able to produce the same level of output with fewer inputs).
It should be noted that the DEA technique provides a “relative” efficiency measure, therefore
its value refers only to the context under investigation. Changing the characteristics of the sample
(e.g., increasing the number of units) or varying the model (type of returns to scale, orientation)
generate different “efficient” units, or different efficiency values. The relative performance of an airport
is defined as the ratio of the weighted sum of its outputs to the weighted sum of its inputs. The weights
Sustainability 2018, 10, 400 9 of 17

are not predetermined, but rather allocated by the model, avoiding bias resulting from subjectively
assigned weights.
By using the CRS model via an output-oriented approach, it is possible to obtain each unit’s
technical efficiency score that represent its capacity to produce a certain amount of output, given a set
of input.
For each airport, Table 3 shows the values of the inputs and outputs used for the DEA analysis;
they are averaged over the 2006–2016 period.

Table 3. Average of input and output airport data over the period 2006–2016 *.

No. Airports LC IC OC APM CAR AAM AR HR CR

1 Alghero 8,025,864 36,052,732 13,677,810 1,443,013 2,226 12,866 9,613,708 6,409,138 6,473,765
2 Ancona 4,049,976 39,608,618 10,554,594 495,208 6331 11,719 2,567,103 1,711,402 6,530,518
3 Aosta 1,094,952 9,722,395 2,056,300 1863 0 147 1,160,011 773,340 282,409
Bari, Brindisi,
4 Foggia, 16,420,571 321,136,731 54,919,104 4,952,786 5835 47,428 31,928,605 21,285,736 28,181,155
Taranto
5 Bergamo 20,855,345 168,863,971 63,098,381 7,498,016 118,846 66,881 59,666,133 39,777,422 5,950,929
6 Bologna 19,155,505 204,834,129 40,858,309 5,580,005 28,973 61,337 45,083,791 30,055,861 1,640,828
7 Bolzano 1,294,115 24,026,015 3,912,906 47,190 0 2193 2,768,064 1,845,375 1,085,631
8 Cagliari 5,698,746 131,131,392 27,463,390 3,334,477 3729 31,878 5,641,924 3,761,282 113,338
9 Catania 12,842,151 127,452,805 33,661,739 6,449,803 7721 56,603 34,367,013 22,911,342 2,465,137
10 Comiso 631,540 19,381,025 2,038,015 304,144 1 2176
11 Cuneo 1,208,104 8,462,489 4,727,013 166,680 686 1871 2,772,736 1,848,490 815,392
12 Elba 352,581 3,355,756 597,399 12,211 0 764 349,462 232,975 569,368
13 Florence, Pisa 23,920,438 130,935,629 41,453,079 6,197,995 7929 67,199 41,476,200 27,650,800 1,444,333
14 Genoa 11,375,395 20,766,869 11,843,283 1,242,709 849 16,227 13,367,713 8,911,809 1,832,522
15 Grosseto 153,468 3,697,845 343,922 3975 0 1764 320,292 213,528 38,459
Lamezia
16 10,501,380 28,881,847 10,473,308 1,976,029 1750 16,364 13,414,410 8,942,940 1,165,734
Terme
17 Lampedusa 1,329,054 2,552,140 766,069 192,356 29 3548 1,400,025 933,350 59
Milan Linate,
18 Milan 147,076,237 1,492,519,434 292,537,314 28,453,800 467,073 286,070 345,320,721 230,213,814 22,333,333
Malpensa
19 Naples 17,286,071 111,631,557 37,211,266 5,714,451 5143 54,995 44,559,699 29,706,466 1,732,137
20 Olbia 10,829,469 50,440,841 15,045,089 1,901,930 452 19,964 16,784,081 11,189,387 3,503,293
21 Palermo 15,828,236 101,536,608 33,567,418 4,590,243 2623 44,932 28,895,596 19,263,730 3,507,620
22 Pantelleria 883,887 1,759,243 743,175 139,359 57 3965 941,855 627,903 3982
23 Parma 1,270,366 24,531,039 5,367,039 205,617 158 3732 1,067,534 711,689 349,086
24 Perugia 1,774,005 7,130,874 2,550,339 164,830 10 3148 1,261,548 841,032 1,618,795
25 Pescara 2,418,650 25,141,532 7,798,159 482,548 1566 6265 4,610,930 3,073,953 2,257,978
Reggio
26 2,889,940 24,331,288 4,280,518 515,081 135 5995 2,239,858 1,493,238 143,177
Calabria
Rome
Ciampino,
27 97,201,545 2,730,020,455 429,363,545 41,019,736 169,270 363,707 400,779,800 267,186,533 19,479,666
Rome
Fiumicino
28 Salerno 1,189,313 3,190,573 1,606,269 7713 0 978 177,558 118,372 38,413
29 Turin 12,315,576 134,879,749 37,571,120 3,475,463 1639 42,486 6,447,551 4,298,367 1,999,882
30 Trapani 3,301,846 31,779,539 8,419,712 1,245,434 325 14,853 5,787,979 3,858,653 2,819,165
31 Treviso 5,106,233 37,278,326 14,540,126 1,926,415 5797 14,792 12,140,877 8,093,918 737,758
32 Trieste 5,587,525 14,749,260 9,569,079 761,813 198 11,259 7,929,407 5,286,271 3,020,194
33 Venice 22,076,250 418,140,375 53,564,125 7,747,417 28,738 78,398 65,964,400 43,976,266 6,293,333
Verona,
34 10,517,572 120,563,482 35,169,083 3,103,782 18,732 33,646 21,392,893 14,261,928 3,807,184
Brescia
Input: LC = Labor costs (euro); IC = Invested capital (euro); OC = Other expenses (euro). Output: APM = Passenger
movements (number); CAR = Cargo (tons); AAM = Aircraft movements (number); AR = Revenues from aeronautical
activities (euro); HR = Revenues from handling activities (euro); CR = Revenues from commercial activities (euro).
* All variables are expressed in euro, except APM (number), CAR (tons) and AAR (number).
Sustainability 2018, 10, 400 10 of 17

Table 4 reports the efficiency results obtained by the application of output-oriented CRS model to
the 34 Italian airports. Values still refer to the 2006–2016 period.

Table 4. DEA estimation results for the CRS output-oriented model.

N. Airports Efficiency Values

1 Alghero 1
2 Ancona 1
3 Aosta 0.52
4 Bari, Brindisi, Foggia, Taranto 1
5 Bergamo 1
6 Bologna 0.94
7 Bolzano 0.85
8 Cagliari 1
9 Catania 1
10 Comiso 0.92
11 Cuneo 1
12 Elba 1
13 Florence, Pisa 0.86
14 Genoa 1
15 Grosseto 1
16 Lamezia Terme 1
17 Lampedusa 1
18 Milan Linate, Milan Malpensa 1
19 Naples 1
20 Olbia 0.97
21 Palermo 0.87
22 Pantelleria 1
23 Parma 0.47
24 Perugia 1
25 Pescara 0.94
26 Reggio Calabria 0.59
27 Rome Ciampino, Rome Fiumicino 1
28 Salerno 0.19
29 Turin 0.67
30 Trapani 1
31 Treviso 1
32 Trieste 1
33 Venice 1
34 Verona, Brescia 0.78

As told, an efficiency value less than 1 indicates that the unit is inefficient. In our case we find 16
inefficient airports out of 34: Aosta, Bologna, Bolzano, Comiso, Florence/Pisa, Olbia, Palermo, Parma,
Pescara, Reggio Calabria, Salerno, Turin, Verona/Brescia. Efficient units (for which the estimated value
of efficiency is equal to 1) are: Alghero, Ancona, Bari/Brindisi/Foggia/Taranto, Bergamo, Cagliari,
Catania, Cuneo, Elba, Genoa, Grosseto, Lamezia Terme, Lampedusa, Milan Linate/Milan Malpensa,
Naples, Pantelleria, Perugia, Rome Ciampino/Rome Fiumicino, Trapani, Treviso, Trieste, Venice.
Table 5 shows the performance indicators’ breakdown. The output-oriented CRS model allows
measurement of the overall efficiency of each DMU (both technical efficiency and scale efficiency: third
column, corresponding to the last column of Table 4), while the pure technical efficiency is measured
through a VRS output-oriented model (fourth column). Hence, the efficient DMUs (which assume
value 1) are fewer than those obtained taking into account the same set with the VRS model. The latter
values reveal that technical efficiency (or managerial efficiency) is not influenced by the firms’ size.
As already seen, the efficiency of scale value (fifth column) is obtained through the ratio between
the overall technical efficiency (CRS) and pure technical efficiency (VRS). Finally, the sixth column
Sustainability 2018, 10, 400 11 of 17

shows the type of returns to scale (constant, increasing or decreasing: CRS, IRS or DRS, respectively)
exhibited by each DMU.

Table 5. Performance breakdown by airport.

Overall Pure Technical

Efficiency of Returns to
N. AIRPORTS Efficiency Efficiency (VRS
Scale Scale
(CRS Model) Model)
1 Alghero 1 1 1 CRS
2 Ancona 1 1 1 CRS
3 Aosta 0.52 0.52 1 DRS
4 Bari, Brindisi, Foggia, Taranto 1 1 1 CRS
5 Bergamo 1 1 1 CRS
6 Bologna 0.94 1 0.94 IRS
7 Bolzano 0.85 0.75 1 DRS
8 Cagliari 1 1 1 CRS
9 Catania 1 1 1 CRS
10 Comiso 0.92 1 0.92 IRS
11 Cuneo 1 0.94 1.06 DRS
12 Elba 1 1 1 CRS
13 Florence, Pisa 0.86 1 0.86 DRS
14 Genoa 1 1 1 CRS
15 Grosseto 1 1 1 CRS
16 Lamezia Terme 1 1 1 CRS
17 Lampedusa 1 1 1 CRS
18 Milan Linate, Milan Malpensa 1 1 1 CRS
19 Naples 1 1 1 CRS
20 Olbia 0.97 1 0.97 IRS
21 Palermo 0.87 0.96 0.91 DRS
22 Pantelleria 1 1 1 CRS
23 Parma 0.47 0.46 1.02 DRS
24 Perugia 1 1 1 CRS
25 Pescara 0.94 0.72 1.31 IRS
26 Reggio Calabria 0.59 0.63 0.94 DRS
27 Rome Ciampino, Rome Fiumicino 1 1 1 CRS
28 Salerno 0.19 0.21 0.92 DRS
29 Turin 0.67 0.77 0.86 DRS
30 Trapani 1 1 1 CRS
31 Treviso 1 1 1 CRS
32 Trieste 1 1 1 CRS
33 Venice 1 1 1 CRS
34 Verona, Brescia 0.78 0.75 1.03 DRS

The efficiency results help to discover some interesting features of the Italian airport system.
All technically efficient airports under the assumption of constant returns to scale (16 over 34, see above)
are technically efficient even under the assumption of variable returns to scale (VRS), which means
that the dominant source of efficiency is the efficiency of scale. Looking at the VRS efficiency scores,
i.e., those concerning pure technical efficiency due to management skills, 24 airports out of 34 (70.6%)
are efficient over the time period here considered. Therefore, In Italy only 10 airports appear inefficient
from an operational point of view, which makes us conclude that overall Italians airports are well
managed with regard to the pure technical efficiency.
Considering the scale efficiency, 26 of 34 units analyzed reach the value of 1. As the efficiency
score has to be considered as an average value during the period, it suggests that approximately 71%
of Italian airports reveal pure technical efficiency, but some of them (4 units, 16.7%) do not exhibit
efficiency of scale.
Finally, 4 airports exhibit increasing returns to scale (they are either small- and medium-sized),
while 10 have decreasing returns to scale (many of them are small-sized). The units characterized
by increasing returns to scale (IRS) may improve efficiency by increasing the productive dimension;
conversely, units characterized by decreasing returns to scale (DRS) could gain in efficiency just
by reducing the size of production. For smaller airport, this could call for a reconsideration of their
Sustainability 2018, 10, 400 12 of 17

activity. The units characterized by constant returns to scale (CRS) work, instead, in optimal production
conditions and the size of their pure technical efficiency is equal to one, given the concurrence of
overall efficiency and scale efficiency.

4. Second Step: Assessing the Efficiency Drivers through Tobit Analysis

4.1. The Model

The Tobit model is also called censored regression model, because the latent variable cannot
always be observed while the independent variable is observable. It is an alternative to OLS regression,
and is employed when the dependent variable is bounded from below or above or both (as it happens
when dealing with efficiency scores, normally lying between 0 and 1). Particularly, we make use of
a random effect Tobit model, which assumes that the unobservable effects are uncorrelated with the
observed exploratory variables (on the contrary, a fixed effect model assumes that they are correlated).
The model can be expressed in a general way as follows:

Yi∗ = βX i + ε i i = 1, . . . , N

with:
a) Yi = Yi * if 0 ≤ Yi * ≤ 1; b) Yi = 0 if Yi * ≤ 0; c) Yi = 1 if Yi * ≥ 1.

In the above, N is the number of observation, Yi * is an unobserved latent variable, Yi is the

dependent variable (DEA scores), Xi is a vector of independent variables, β is a vector of unknown
coefficients to be estimated, and εi is an independently distributed error term, assumed to be normal
with zero mean and constant variance σ2 .
As said, we employ the Tobit regression in order to identify the factors that are more significant
in influencing airports efficiency. The importance of our analysis stays in providing information
to airports managers about the major determinants requiring more attention in the course of
business activities.
We again consider the 34 Italian airports, and employ the first-stage DEA efficiency scores
(technical efficiency, overall efficiency, and scale efficiency) as the dependent variable, while the
explanatory variables are a number of other important factors that may affect the production efficiency:
the number of Work Load Units, the percentage of passengers handled by low-cost carriers, and the
percentage of cargo traffic. In our model, we suppose that estimated coefficients are independent of
time, so that, the greater the value of efficiency, the more efficient the airport. In case the regression
coefficient comes out to be positive, we deduce that they positively affect efficiency.
Our explanatory variables (airport size, the share of LCC passengers, and the share of cargo traffic)
have been selected among those that have been widely used within the international literature on the
topic. Hence, we estimate the following relationship:

Yi = β0 + β1 SIZEi + β2 LCCi + β3 CARGOi + εi .

Here, Yi are the efficiency scores (overall technical, pure technical, and scale efficiency scores,
respectively), while the three environmental variables (measured for each airport) are: the number of
Work Load Units, or WLU (SIZE); the percentage of passengers handled by low-cost carriers (LCC);
and the percentage of cargo traffic relative to total WLUs (CARGO).

4.2. Empirical Results

In Table 6 we show the empirical results of our three Tobit estimations for the sample of 34 Italian
airports. Particularly, we report the marginal effect of each regressor on the dependent variables.
The Likelihood Ratio test indicates that in all of them the variables included in the model have a
statistically significant effect on the dependent variables. All parameters exhibit a significant sign
Sustainability 2018, 10, 400 13 of 17

(at least at the 5% level), and their sign always reveals a positive influence of the corresponding
explanatory variable on the dependent (efficiency) variable.

Table 6. Tobit estimation results.

Overall Technical Pure Technical Scale Efficiency

Variable
Efficiency (CRS) Efficiency (VRS) (Economies of Scale)
SIZE 0.97 *** 1.24 ** 0.76 ***
LCC 1.88 ** 1.83 ** 0.62 ***
CARGO 0.34 *** 0.03 *** 0.87 ***
The reported coefficients measure marginal effects. *** Significant at the 1% level; ** Significant at the 5% level.

The coefficient of SIZE (airport size) indicates that larger airports are expected to have higher
overall technical efficiency, pure technical efficiency, and scale efficiency scores compared to smaller
airports. This evidence is in line with previous similar research. For example, Perelman and Serebrisky
(2012) [66] perform a DEA analysis for Latin American airports and conclude that larger airports have
higher technical efficiency than smaller ones. The same result characterizes the analyses by Pels et al.
(2003) [39], Martín et al. (2009) [67], and Coto-Millan et al. (2014) [63].
The presence of LCCs is also positively associated with all types of efficiency. Actually, the introduction
of LCCs has generated a substantial growth of demand in the Italian airports, especially in small- and
medium-sized ones. This is also what Cavaignac and Petiot (2017) [68] find in their survey on papers
applying DEA to the transport sectors. Moreover, our results are in line with those obtained for
British airports by Bottasso et al. (2013) [69], who conclude that LCCs’ entry on European markets
has stimulated airports productivity improvements, which in turn has positively affected total factor
productivity. Likewise, Coto-Millan et al. (2014) [63] find that the share of LCC passengers has had a
positive effect on the efficiency of Spanish airports.
Finally, the cargo traffic (CARGO) positively impacts all types of efficiency as well. Hence, airports
with a higher proportion of cargo traffic are again able to get higher levels of efficiency [23]. Once more,
this confirms the evidence of previous works, for which airports with a large proportion of cargo traffic
are expected to disclose a higher variable factor productivity, since handling cargo is capital intensive
and therefore more productive than handling passengers.

5. Conclusions
The European policies on air transport liberalization have had positive effect on environment
inasmuch as they have improved the natural resources use. Notwithstanding, management systems
designed to achieve the maximum efficiency of regional airports do not seem to pay particular attention
to the issue of the economic and environmental sustainability.
In the air transport related literature little attention has been devoted to the aspects involved in
the sustainability issue of peripheral airports and this might seem surprising given the relevance of
the problem.
In our opinion, a viable path for exploring the influence of exogenous factors in airports’ efficiency
is to employ a two-stage procedure. Specifically, from a pure efficiency perspective, we estimate
technical efficiency of Italian airports over a group of variables that may affect it.
This paper, starting from general considerations about the literature concerning DEA studies in
the air transport, focuses attention on the overall technical, pure technical, and scale efficiency of Italian
airports. Analyzing several factors and their impact on efficiency level, we investigate the economic
and environmental performance of 34 Italian airports in the period 2006–2016. In order to provide a
clear-cut answer, we use the DEA method that appears particularly adequate because it allows us to get
scores measuring overall technical, pure technical, and scale efficiency. Such analysis highlights some
interesting features of the Italian airport system. First, scale economies affect the efficiency outcome
in a significant way, so that, in presence of increasing returns to scale, the airport managers should
Sustainability 2018, 10, 400 14 of 17

aim at extending the catchment area of the airport or developing strategies that are able to attract new
carriers and new business activities, such as cargo activity. Second, the majority of Italian airports are
well managed with regard to the pure technical efficiency. In a second step, we have applied a Tobit
regression model, with the aim of investigating whether airport size, LCCs presence and cargo traffic
have a significant influence on technical and scale efficiency of Italian airports. The results suggest a
positive association between overall technical efficiency and these variables, confirming the key role
of market in achieving a more sustainable and efficient airport economy. In other words, a regional
airport can become economically sustainable if the airport managing authority acts on the market so as
to improve both cargo demand and LCCs demand. This confirms the theoretical hypothesis according
to which regional airports are economically sustainable if there is an intensive use of the infrastructure,
otherwise they would become a problem—and not a resource—for its territory [70].
The analysis of airport performances is carried out following the idea that political determinants
are very influential on management system.
Moreover, our findings seem of major interest not only for airport managers and operators,
but also for policy makers and regulators. Actually, they shed light on how airports’ performance and
environmental sustainability could be improved as well as on the influence that airport size and traffic
distribution between passengers and cargo can exert on airport efficiency.
Finally, in the light of the analysis’ findings reported in this paper, we conclude that air transport
privatization and deregulation is able to positively affect the transport environmental efficiency and
sustainability. This is to say that our results are helpful for better understanding the role of the
market mechanism in achieving transport sustainability. However, the topic needs to be further and
carefully investigated as regulation, traditionally, is considered crucial in terms of consumer benefits
and environmental performance. Therefore, the empirical analysis of the effects of privatization and
deregulation is recommended for evaluating such political programs.

Author Contributions: This work is the outcome of joint efforts of the three authors, who contributed equally to
conceive and design the research. They read and approved the final manuscript.
Conflicts of Interest: The authors declare no conflicts of interest.

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