Cost efficiency is a key concern for any business. Existing efficiency analysis of airports mainly focus on minimizing costs, maintaining the standards of the services provided. This chapter examines the cost efficiency of 13 Ethiopian airports during the period 2002–17 using the stochastic frontier panel data approach. It specifies the Cobb–Douglas cost function where cost is a function of passenger output, the freight cargo transported, and factor prices of labour, energy, fixed assets and price of capital investments. Its estimations are done by five models using both time-invariant and time-variant efficiencies. The two output cost elasticities is < 1 suggesting airport cost increases less than the output (increasing returns to scale). Airport cost was inelastic to change in passenger output and price of labour. The cost implications and efficiency effects of each airport provides evidence of time-invariant or long-run persistent efficiency with minor differences between the models while short-run transient efficiency levels have significant variations between the models. Airports’ efficiency levels show that all airports providing international services have lower cost efficiency compared to those airports which provide domestic services. The biggest hub Addis Ababa Bole International Airport is the least efficient and the Gode Domestic Airport is the most efficient. This shows that airports with minimum services and facilities or infrastructure score better in terms of efficiency. Though the short-run efficiency seems high compared to long-run efficiency, overall cost efficiency of the airports was low. Besides, the BC-95 cost inefficiency effect is positive and significant implying that cost inefficiencies will increase in the future. Hence, government interventions for bringing structural changes in airports’ cost saving strategies are crucial. Ethiopian airports should therefore improve the cost efficiency levels in the short-term and develop long-term efficiency improvement strategies by using more cost saving approaches.
An Analysis of the Cost Efficiency of Ethiopian Airports
Frontiers in African Business Research
2022-09-20
40 pages
Aufsatz/Kapitel (Buch)
Elektronische Ressource
Englisch
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