Title:
Analyses of Short-Run Airport Costs in the U.S.: Pre- and Post-COVID-19
Analyses of Short-Run Airport Costs in the U.S.: Pre- and Post-COVID-19
Author(s)
Yang, Yushuo
Advisor(s)
McCarthy, Patrick S.
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Abstract
Airports are crucial for passenger and cargo transportation, as well as for employment generation and GDP growth. A better understanding of airport cost structure enables airport managers and policymakers to more efficiently allocate their limited resources and design policies, respectively. This dissertation conducts short-term multi-output cost analyses for 50 medium and large U.S. airports. Using a multi-product translog cost function methodology, the dissertation addresses three research questions: what are the effects of negative attributes on short-run airport cost structures; what impact did COVID-19 have on airport short-run operating costs; and for aircraft departures, how does the short-run marginal social cost differ from marginal private costs. Based on 2012 – 2019 data, the first essay estimates a translog cost function with three positive outputs (departures, workload, and non-aeronautical revenue) and three negative attributes (delay, congestion, and air pollution). The results show that delay and congestion have statistically significant and positive effects on airport total operating costs. Compared to the cost analysis with negative attributes, the cost analysis without negative attributes produces unreliable estimates of production properties. Extending the data to cover two COVID-19 years, 2020 and 2021, the second essay examines the effects of COVID-19 and related policies on airport short-term costs. In addition, the essay decomposes the percentage change in average variable costs between pre-COVID-19 and COVID-19 periods. The results indicate that COVID-19 (cases and deaths) and associated policies (state face mask and COVID-19 vaccine mandates) significantly and positively affect the total operating costs. COVID-19 cases and the time/technical efficiency effect are the two most influential factors for the percentage change in average variable costs. The third essay focuses on aircraft departures and estimates a measure of marginal social cost that includes negative externalities (delay, congestion, and air pollution). The essay examines whether the current landing fees cover marginal departure social costs. The results find that, on average, current landing fees only cover the marginal private costs but are significantly less than the marginal social costs per departure. This strongly suggests that current airport landing fees do not internalize the negative externalities, resulting in pricing inefficiency from the social perspective. Each of the three essays conducts sub-sample analyses between large and medium hubs, as well as between cargo and non-cargo airports. The results find differences across different airport types in each analysis. In summary, the dissertation uniquely contributes to existing knowledge on the impacts of negative attributes, COVID-19, and the extent to which existing landing fees fall short of the marginal social costs of airport departures. The first essay contributes by incorporating negative attributes into the airport cost analysis and examining production properties after controlling for the negative attributes. The second essay contributes by analyzing the impact of COVID-19 and related policies on airports’ short-term costs and decomposing the percentage change in average variable costs between pre-COVID-19 and COVID-19 periods, which offers new insights into the pandemic’s impact on airports’ costs and technical characteristics. The third essay contributes by estimating the marginal social cost using a broader sample and assessing the pricing efficiency of current landing fees from the social perspective.
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Date Issued
2023-07-27
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Text
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Dissertation