Abstract:

In this paper we analyze the cost structure of the UK airport industry by estimating a variable cost function for the period 1994-2005. Overall results suggest that average costs decrease until passenger traffic reaches five millions, remain constant over the range between five and fourteen million passengers and afterwards start to increase. Moreover, we find evidence consistent with the existence of overcapitalization for the largest regulated airports. Finally, private airports seem to be characterized by lower costs, although cost differentials associated to ownership status shrank over time. Main results are robust to unobserved heterogeneity and to endogeneity biases.

Document Type:

Appeared or available online: June 23, 2011

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