ARTICLE IN PRESS

Journal of Air Transport Management 13 (2007) 184–191

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Performance evaluation of Italian airports: A data envelopment analysis

Carlos Pestana Barrosa, Peter U.C. Diekeb,
a
Instituto Superior de Economia e Gestão, Technical University of Lisbon, Rua Miguel Lupi, 20, 1249-078 Lisbon, Portugal
b
School of Recreation, Health, and Tourism, College of Education and Human Development, George Mason University,10900 University Boulevard,
Manassas, VA 20110, USA

Abstract

This paper addresses empirically financial and operational performance of Italian airports using data envelopment analysis (DEA)
methodology. With panel data for 2001–2003, the study tests variable relationships—the relative roles of dimension, managerial status
and workload unit—to measure the proximity of the airports to the frontiers of best practices. The implications of the research for
managerial purposes are then drawn to validate prior findings of the same relationships in other geographical contexts.
r 2007 Elsevier Ltd. All rights reserved.

Keywords: Italian airports; Data envelopment analysis; Economic efficiency

1. Introduction data for 3 years (2001–2003), to examine the relative roles

The importance of efficiency of airports has been of
interest in contemporary economics, given airports’ in-
creasingly strategic importance in the movement of people
and cargo in the globalized world (Adler and Berechman,
2001). Moreover, the increased airline competition brought
about by deregulation and liberalization has heightened
this recognition and placed airports in a much more
competitive environment. As a result, airports are now
under pressure to improve their efficiency relative to
competitors. De Borger et al. (2002) opine that bench-
marking analysis is one of the ways to drive airports
towards the frontier of best practices.
This paper analyzes, by means of four data envelopment
analysis (DEA) models, the financial and operational
performance of Italian airports. These model types are:
the DEA-CCR (or Charnes, Cooper and Rhodes) model
(Charnes et al., 1978); the DEA-BCC (or Banker, Charnes
and Cooper) model (Banker et al., 1984); the Cross-
Efficiency DEA model (Sexton et al., 1986; Doyle and
Green, 1994); and the Super-Efficiency DEA model
(Andersen and Petersen, 1993). The study utilizes panel
Corresponding author.
E-mail address: pdieke@gmu.edu (P.U.C. Dieke).
of dimension, managerial status and workload unit (WLU)
in determining the proximity of airports to the frontier of
best practices.
DEA methodology can enable management to bench-
mark the best-practice decision-making unit (DMU), here
the Italian airport authority, by calculating scores denoting
their efficiency within a linear programming procedure.
Furthermore, DEA provides estimates of the potential
improvement that can be made by inefficient DMU.
2. Methodology
Whilst there is extensive literature on benchmarking
applied to a diverse range of activities, there are few
looking at European airports. Table 1 highlights the main
cases.
There is a tradition of analyzing airports by separating
activities into terminals and movements. Several papers
compare the DEA model with the frontier model, while
others mix principal component analysis with a DEA
model but there has been use of a stochastic frontier
allowing contextual variables.
Following Farrell (1957), Charnes et al. (1978) first
introduced the term DEA to describe a mathematical
programming approach to the construction of production

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doi:10.1016/j.jairtraman.2007.03.001
 ARTICLE IN PRESS
C. Pestana Barros, P.U.C. Dieke / Journal of Air Transport Management 13 (2007) 184–191 185

Table 1
Research into Airport Efficiency

Papers Method Units Inputs Outputs

Gillen and Lall DEA-BCC model and a 21 US airports (i) Terminal services model (i)Terminal services model
(1997) Tobit model (1) Number of runways (1) Number of passengers
(2) Number of gates (2) Pounds of cargo
(3) Terminal area
(4) Number of baggage collection belts
(5) Number of public parking spots

(ii) Movement model (ii) Movements model

(1) Airport area (1) Air carrier movements
(2) Number of runways (2) Commuter
(3) Runway area movements
(4) Number of employees

Parker (1999) DEA-BCC and CCR 32 UK regulated airports,
models 1979/1980 to 1995/1996.
In a second model, uses 22
airports from 1988/89 to
1996/97
(1) Number of employees (1) Turnover
(2) Capital input estimated as an (2) Passengers handled
annual rental based on a real rate of (3) Cargo and mail
return of 8% each year applied to business
net capital stock
(3) Other inputs defined as the residual
of total operating costs

Murillo- DEA-Malmquist 33 Spanish civil airports, (1) Number of workers Number of passengers
Melchor (1999) 1992 to 1994 (2) Accumulated capital stock proxied
by amortization
(3) Intermediate expenses

Gillen and Lall DEA-Malmquist 22 major US airports, (i) Terminal services model (i) Terminal services model
(2001) 1989 to 1993
(1) Number of runways (1) Number of passengers
(2) Number of gates (2) Number of pounds
(3) Terminal area
(4) Number of employees
(5) Number of baggage collection belts
(6) Number of public parking places

(ii) Movement model (ii) Movement model

(1) Airport area (1) Air carrier movements
(2) Number of runways (2) Commuter
(3) Runway area movements
(4) Number of employees

Pels, Nijkamp DEA-BCC model 34 European airports, (i) Terminal model

and Rietveld 1995 to 1997 (1) Terminal size in square metres (1) Number of passengers
(2001)* (2) Number of aircraft parking
positions at the terminal (ii) Movement model
(3) Number of remote aircraft parking (1) Aircraft transport
positions movement
(4) Number of check-in desks
(5) Number of baggage claims

frontiers and the efficiency measurement of the constructed
frontiers assuming constant returns-to-scale (CRS).
In terms of subsequent variants, the DEA-CCR and
DEA-BCC models are strong in identifying the inefficient
units, but are weak in discriminating between the efficient
units (Seiford and Zhu, 1999). They often rate too many
units as efficient. To overcome this deficiency, the Cross-
Efficiency DEA model (Doyle and Green, 1994; Sexton
et al., 1986) and the Super-Efficiency DEA model
(Andersen and Petersen, 1993) have been used.
2.1. Data
Forty-nine airports are registered in the Italian Statis-
tical Register of Air Transportation and 31 airports for
which balance sheet data allowing the combination of
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186 C. Pestana Barros, P.U.C. Dieke / Journal of Air Transport Management 13 (2007) 184–191

financial and operational data are available are examined
here using DEA (Table 1).
Regarding WLU and total passenger numbers, the
standard deviation is higher than the mean, signifying that
the sample is not very homogenous. This is largely because
there are large airports in the sample alongside small ones, a
feature stemming from the local population densities.
Relative to managerial status, only the main airports are
fully privatized, while the remainder operate under mixed
regimes with the managing director a public appointee who
manages the airport by outsourcing its activities to private
enterprises.
To estimate the cost frontier, balanced panel data on the
31 Italian airports for the 2001–2003 are used (Table 2).
The production of the airport authorities using a general-
ized Cobb–Douglas production function is measured.
Frontier models require the identification of inputs and
outputs. Several criteria can be used in the selection. The
first empirical criterion is the availability of inputs and
outputs. Second, a literature survey can provide supporting
evidence as can the professional opinion of the airport
managers.
The output is measured by number of planes, number of
passengers, cargo, aeronautical receipts, handling receipts,
and commercial receipts. We measure inputs as labor costs,
capital invested and operational costs excluding the labor
costs. The monetary variables were deflated by the GDP
deflator and denoted at constant 2001 prices. As DEA is
designed to handle physical measures, but the balance sheets
provided only financial variables, the deflation of the
variables is of importance to minimize the role of prices.
DEA that uses financial variables is common in the literature,
but despite this, it remains a caveat in productivity analysis.
The combination of indicators meets DEA convention
that the minimum number of DMU observations should be
greater than three times the number of inputs plus outputs
[120X3(6+3)] (Raab and Lichty, 2002). Moreover, we also
respected the convention that the minimum number of
units is equal to or larger than the product of the number
of outputs and inputs (Boussofiane and Dyson, 1991).

Table 2
Characteristics of the Italian airports used in the analysis (2003)

No. Airport WLU (euro) Rotation of capital Management status Total passenger
(production/capital) (private total ¼ 1, arrivals (number)
private partial ¼ 0)

1 Alghero—Fertilia 812.01 0.37 0 440 606

2 Ancona—Falconara 519.81 0.65 0 235 409
3 Bari-Palese Macchie 1919.36 0.31 1 715 940
4 Bergamo-Orio aal Serio 2431.31 0.49 1 14 06 640
5 Bologna-Borgo Panigale 3554.03 0.49 0 17 54 485
6 Bolzano 36.60 0.11 0 20 843
7 Cagliari—Elmas 2201.08 0.13 0 11 45 426
8 Catania—Fontanarossa 4115.25 0.95 0 23 80 289
9 Crotone 38.35 0.23 0 44 153
10 Cuneo—Levaldigi 7.84 0.12 0 14 520
11 Firenze—Peretola 1385.74 0.62 1 685 840
12 Forli 161.35 0.5 0 175 719
13 Genova—Sestri 1030.54 0.69 1 517 044
14 Lamezia Terme 795.91 0.75 0 556 032
15 Milano—Malpensa 28356.95 0.36 1 87 65 195
16 Napoli—Capodichino 4158.05 0.51 1 2266937
17 Olbia—Costa Smeralda 1389.95 0.73 0 745 607
18 Palermo—Punta Raisi 3604.30 0.9 0 18 25 976
19 Parma 53.10 0.16 0 28 847
20 Perugia—Sant’Egidio 54.51 0.28 0 28 138
21 Pescara 310.82 0.84 0 148 598
22 Pisa—San Giusto 1701.30 0.83 0 985 267
23 Reggio Calabria 467.84 0.32 0 223 115
24 Rimini—Miramare 255.74 0.73 0 107 007
25 Roma—Fiumicino 27687.96 0.17 1 1 28 36 515
26 Torino—Caselle 2831.87 0.48 1 14 05 183
27 Trapani—Birgi 43.22 0.86 0 119 518
28 Treviso—Sant’Angelo 674.06 0.83 0 340 050
29 Trieste—Ronchi dei Legionari 654.20 1.12 0 302 795
30 Venezia—Tessera 4312.35 0.26 1 26 33 850
31 Verona—Villafranca 2231.05 0.59 0 11 95 367
Mean 3154.72 0.528 0.290 14 20 997
Median 1030.54 0.500 — 556 032
Standard Deviation 6779.30 0.281 — 26 67 912
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Table 3
Characteristics of the variables
Variables Definition
Outputs
Number of planes Number of planes that landed at and take off from the airport
Number of passengers Number of passengers who arrive at and depart from the
airport
General cargo Number of tons of cargo that arrive and depart from the
airport
Handling receipts Sales to planes in milliard Euro
Aeronautical sales Sales to planes in milliard euro
Commercial sales Sales to passengers in milliard euro
Inputs
Labor costs Labor costs in milliard euro
Capital invested Book value of assets in milliard euro
Operational costs excluding labour Operational in costs of airports in milliard euro
costs
By using an output orientation, we can determine
whether an airport is capable of producing the same level
of output with less input (Table 3).
We observe that the Italian airport authorities are
relatively heterogeneous, with the standard deviation being
higher than the mean for some variables.
3. DEA results
The DEA index can be calculated in several ways. Here
we estimate an output-oriented, technically efficient (TE)
DEA index, assuming that airports aim to maximize profits
resulting from their activity. In this context, inputs are
exogenous and the outputs are endogenous because of the
competitive environment in which the units compete
(Kumbhakar, 1987). The variable returns-to-scale (VRS)
hypothesis is chosen, disentangling technical efficiency into
two components: pure technical efficiency and scale
efficiency. The VRS scores measure pure technical effi-
ciency only. However, the CRS index is composed of a
non-additive combination of pure technical and scale
efficiencies. A ratio of overall efficiency scores to pure
technical efficiency scores provides a measurement of scale
efficiency. The relative efficiency of Italian airport autho-
rities is presented in Table 4, with the airport authorities
being ranked according to the BCC model, using GAMS
software (Brooks et al., 1992).
A number of points emerge. First, there are too many
airport authorities on the efficient frontier; i.e. obtaining
scores on the CCR and BCC of unity. Secondly, best-
practice calculations indicate that almost all Italian airport
authorities operated at a high level of pure technical
efficiency in the period. Thirdly, all technically efficient
CRS airports are also technically efficient in VRS,
signifying that the dominant source of efficiency is scale.
Fourthly, on the basis of the BCC results regarding pure
technical efficiency attributable to management skills, all
187
Minimum Maximum Mean Square
deviation
629 293790 35996.45 60640.01
7222 25809828 2690814.68 5256722.37
0 26103618 976067.38 3377147.64
0 272486 14599.09 39723.23
0 206550 17582.90 42556.60
0 235406 16319.26 46357.69
574.886 170141.7 14530.01 34367.59
354.43 2795018 137532.64 455246.70
430.76 498970 41553.64 98288.04
but five airports are efficient in the period. The rationale
for interpreting BCC as management skills is based on the
contrast between the CCR and BCC models. The CCR
model identifies the overall inefficiency, whereas BCC
differentiates between technical efficiency and scale effi-
ciency (Gollani and Roll, 1989). Based on this differentia-
tion, the ratio between CCR and BCC enables the
estimation of scale efficiency (Table 3) and, assuming
efficiency is due to managerial skills and scale effects, the
BCC scores are interpreted as managerial skills. Thus,
according to the BCC scores, only three airports are
inefficient.1
Fifth, according to the scale efficiency, almost all Italian
airport authorities are efficient, while a small number
is not.
Sixth, the efficiency scores are average values for the
period, but when we analyze the airport authorities for
each year, the result is the same: all Italian airport
authorities display pure technical efficiency, but some of
them do not display scale efficiency. Italian airports are
thus well managed as far as pure technical efficiency is
concerned, but dimension makes a difference and there-
fore, some airports have decreasing returns to scale, while
others have increasing returns to scale.
Table 5 presents the results of the Cross-Efficiency DEA
model and the Super-Efficiency DEA model to cross-
validate the DEA-CCR and DEA-BCC models and to
restrict the number of DMUs on the best practice frontier.
The scores from the Cross-Efficiency and the Super-
Efficiency DEA models, unlike those seen in Table 4, rank
the Italian airports unequivocally, and that they maintain
1
There may be an alternative reason for the level of technical efficiency.
The assumption here is essentially that associated with Farrell’s work on
efficient frontiers, namely that a lack of skilled resources might lead to
production within it. An alternative view is that of Leibenstein whose
work on X-inefficiency suggests that it is not always a matter of skills but
can also involve motivation.
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Table 4
CCR-DEA Model and BCC-DEA Model

No. Airport Technical efficiency, Technical efficiency, Scale efficiency Position of the
constant returns-to- variable returns-to- company on the
scale CCR model scale BCC model frontier

1 Alghero—Fertilia 0.936 0.940 0.997 Drs

2 Ancona—Falconara 1.000 1.000 1.000 —
3 Bari-Palese Macchie 0.759 0.763 0.994 Drs
4 Bergamo-Orio aal 1.000 1.000 1.000 —
Serio
5 Bologna-Borgo 1.000 1.000 1.000 —
Panigale
6 Bolzano 1.000 1.000 1.000 —
7 Cagliari—Elmas 1.000 1.000 1.000 —
8 Catania— 1.000 1.000 1.000 —
Fontanarossa
9 Crotone 0.533 1.000 0.533 Irs
10 Cuneo—Levaldigi 1.000 1.000 1.000 —
11 Firenze—Peretola 1.000 1.000 1.000 —
12 Forli 1.000 1.000 1.000 —
13 Genova—Sestri 1.000 1.000 1.000 —
14 Lamezia Terme 1.000 1.000 1.000 —
15 Milano—Malpensa 1.000 1.000 1.000 —
16 Napoli—Capodichino 1.000 1.000 1.000 —
17 Olbia—Costa 1.000 1.000 1.000 —
Smeralda
18 Palermo—Punta Raisi 1.000 1.000 1.000 —
19 Parma 0.918 1.000 0.918 Drs
20 Perugia—Sant’Egidio 0.703 0.741 0.948 Irs
21 Pescara 1.000 1.000 1.000 —
22 Pisa—San Giusto 1.000 1.000 1.000 —
23 Reggio Calabria 1.000 1.000 1.000 —
24 Rimini—Miramare 1.000 1.000 1.000 —
25 Roma—Fiumicino 1.000 1.000 1.000 —
26 Torino—Caselle 1.000 1.000 1.000 —
27 Trapani—Birgi 1.000 1.000 1.000 —
28 Treviso—Sant’Angelo 1.000 1.000 1.000 —
29 Trieste—Ronchi dei 1.000 1.000 1.000 —
Legionari
30 Venezia—Tessera 1.000 1.000 1.000 —
31 Verona—Villafranca 1.000 1.000 1.000 —
Mean 0.962 0.982 0.980
Median 1.000 1.000 1.000
Standard Deviation 0.105 0.062 0.084

Technical efficiency scores for Italian airport authorities, average values for the period 2001–2003.

the same ranking, thereby overcoming the difficulty that
the CCR-DEA and BCC-DEA models have in discriminat-
ing between the efficient units.
3.1. Efficiency by different types of Italian airports
Having established the efficiency rankings of the Italian
airport authorities, we now test some hypotheses related to
the rankings obtained. The Mann–Whitney U-test, which
tests for differences between the efficiency scores, is
adopted. Golany (1996) recommends the Mann–Whitney
U-test for the non-parametric analysis of DEA results that
is used here because the efficiency scores do not follow a
standard normal distribution. The super-efficient scores are
chosen because they adequately discriminates the units
analyzed.
The following hypotheses are defined:
Hypothesis 1. Large airport authorities are more efficient
than small airport authorities.
This is a common hypothesis in airport analysis where
dimension and efficiency are possibly related. Airports are
classified by the book values of their assets and then
dividing the sample into two based on this. It is expected
that larger airports are more efficient because of economies
of scale.
Hypothesis 2. Airports under fully private management are
more efficient than those under partially private manage-
ment.
The separation of Italian airport authorities into
partially private and fully private is based on their property
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Table 5
Cross-efficiency DEA model and Super-Efficiency DEA model, Technical Efficiency scores for Italian airport authorities, average values for the period
1991–2003

No. Airport Technical efficiency, cross- Technical efficiency, super-efficiency scores

efficiency scores

1 Alghero—Fertilia 0.961 0.982

2 Ancona—Falconara 1.036 1.172
3 Bari-Palese Macchie 0.759 0.763
4 Bergamo-Orio aal Serio 1.129 1.135
5 Bologna-Borgo Panigale 1.135 1.139
6 Bolzano 1.082 1.117
7 Cagliari—Elmas 1.053 1.192
8 Catania—Fontanarossa 1.032 1.125
9 Crotone 0.638 1.052
10 Cuneo—Levaldigi 1.028 1.152
11 Firenze—Peretola 1.067 1.173
12 Forli 1.118 1.282
13 Genova—Sestri 1.052 1.245
14 Lamezia Terme 1.053 1.182
15 Milano—Malpensa 1.378 1.452
16 Napoli—Capodichino 1.219 1.352
17 Olbia—Costa Smeralda 1.191 1.238
18 Palermo—Punta Raisi 1.102 1.218
19 Parma 0.927 1.021
20 Perugia—Sant’Egidio 0.718 0.821
21 Pescara 1.052 1.091
22 Pisa—San Giusto 1.231 1.327
23 Reggio Calabria 1.093 1.112
24 Rimini—Miramare 1.116 1.135
25 Roma—Fiumicino 1.532 1.163
26 Torino—Caselle 1.025 1.051
27 Trapani—Birgi 1.032 1.063
28 Treviso—Sant’Angelo 1.045 1.052
29 Trieste—Ronchi dei Legionari 1.063 1.085
30 Venezia—Tessera 1.072 1.086
31 Verona—Villafranca 1.067 1.073
Mean 1.064 1.130
Median 1.063 1.135
Standard Deviation 0.166 0.136

status. There are 10 Italian airports under private manage-
ment. We compare the efficiency scores relative to these 10
airports (30 observations) with the efficiency scores of the
10 most efficient public airports. We expect the privately
managed airports to be more efficient, since they have
higher efficiency scores. This expectation gains support
from the presence of principal-agent relationships observed
in public entities (Jensen and Meckling, 1976).
Hypothesis 3. Airports with higher WLU during the period
are more efficient than airports with lower WLU.
The WLU is considered a natural benchmark element
when comparing airport (Graham, 2005) and the stated
hypothesis is an intuitive one based on the definition of
WLU, as a standard measure of output defined as one
passenger or 100 kg of cargo. The sample is split into two
on the basis of the WLU rankings. It is expected that the
higher the WLU airports are the more efficient due to
economies of scale effects. Table 6 presents the Mann–
Whitney Z-test results.
The minus sign of the Z-score indicates that large
airports tend to have higher efficiency scores than smaller
ones, validating the first hypothesis and is in line with
previous research on airport efficiency (Murillo-Melchor,
1999). Moreover, privately managed airports are found to
have higher efficiency scores than publicly managed
facilities validating the second hypothesis that private
airports are more efficient than their public counterparts
(Parker, 1999).
Finally, the test shows that airports with higher WLU
tend to be more efficient than airport authorities with lower
WLU supporting the notion that WLU is a good proxy for
the efficiency scores (Graham, 2005).
We thus find that the majority of Italian airports are
managed with pure technical efficiency but that scale
effects differentiate airport authorities, with some display-
ing scale efficiency and others not. Moreover, large
airports, with a higher book value of assets, tend to have
higher efficiency scores than those with lower values, an
effect that can be explained by the economies of scale
 ARTICLE IN PRESS
190 C. Pestana Barros, P.U.C. Dieke / Journal of Air Transport Management 13 (2007) 184–191
Table 6
Mann–Whitney test of differences in efficiency
Reference Mann–Whitney U-test
Large airport authorities vs. 199.00
small airport authorities
Privately managed airport 135.00
authorities vs. publicly managed
airport authorities
Airport authorities with higher 162.00
WLU vs. airport authorities
with lower WLU
*Indicates significance at a 5% level.
(Murillo-Melchor, 1999). Additionally, totally private air-
ports tend to have higher efficiency scores than partially
private airport authorities possibly because of differences
in the principal-agent relationship (Jensen and Meckling,
1976). This relates to the difficulty of controlling those
empowered as managers to act on behalf of the govern-
ment. Since partially private Italian airports have public-
appointed Managing Directors, they may be unable to full
achieve efficiency. Finally, airports with higher WLU tend
to be more efficient than those with lower WLU, an effect
that is explained by the economies of scale (Graham, 2005).
The general conclusion is that scale is of paramount
importance and therefore, the DEA-CCR models should
not be used alone in the evaluation of the airports’
performance.
4. Conclusions
This article used a simple framework for the comparative
evaluation of the Italian airport authorities and the
rationalization of their operational activities. The analysis
is based on a DEA model that allows for the incorporation
of multiple inputs and outputs in determining relative
efficiencies. Benchmarks are provided for improving the
operations of poorly performing airports. The general
conclusion is that the Italian airports display relatively high
managerial skills, being VRS-efficient for the most part.
However, there are some inefficient airport authorities and
the analysis highlights some of the reasons for this.
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