The Impacts of Ownership, Level of Subsidies and Contractual Determinants on the Efficiency of European Public Service Obligation Air Transport Operators



The Impacts of Ownership, Level of Subsidies and Contractual Determinants on the Efficiency of European Public Service Obligation Air Transport Operators

Authors

R Merkert , G Williams, Cranfield University, UK

Description

This paper aims to benchmark European PSO air transport operators. It also evaluates the impacts of ownership, type of operation, level of subsidy and other contractual details on the technical, allocative and cost efficiency of these carriers.

Abstract

Public service obligations (PSOs) for the provision of air transport in Europe are of increasing importance to policy makers, regulators, transport authorities and people associated with the aviation and tourism industry. Hence, there is substantial research interest concerning best practices in procuring such air transport services (typically to remoter regions such as the Hebrides, Orkney and Shetland Islands in Scotland). A PSO is a form of service of general interest in which a state or public transport authority can subsidize an air connection for social or economical reasons. Particularly for the latter, it is interesting to evaluate how efficiently these services are operated. However, until now there has been no systematic analysis on the relative performance of individual or groups of PSO operators nor is there any evidence on factors that may determine the efficiency of these operators. This paper aims to benchmark the efficiency of European PSO air transport operators in order to be able to evaluate the effects of ownership, type of operation, level of subsidy and other contractual details on the technical, allocative and cost efficiency of these carriers for the first time. We apply a two-stage bootstrapped data envelopment analysis (DEA) to a sample of European PSO operators. In the first stage, a number of DEA models (variations of input and output factors) are applied to compute the relative performance of the operators. This is followed by second-step Tobit regressions, which seek to evaluate the impact of institutional (e.g. ownership) operational (e.g. types of aircraft) and fiscal (level of subsidy) factors on efficiency.

Publisher

Association for European Transport