Technical and allocative efficiency in airports.

Abstract

Economic efficiency can be defined as relative productivity over time or space, or both. It relates to the concept of a production possibility frontier and comprises both technical efficiency and allocative efficiency. This article reports on a study of the technical and allocative efficiency of 37 Portuguese airports. The authors used data envelopment analysis (DEA) to rank the airports according to their total productivity for the period 1990 to 2000. The analysis is based on a DEA model that allows for the incorporation of multiple inputs and outputs in determining relative efficiencies. The study was undertaken to seek the best peer airports for improving the performance of least performing airports. The authors' general conclusion is that the Portuguese airports should be privatized, and that an organizational government environment is needed to overcome the deficits in technical and allocative efficiency observed in the study period. The authors list recommendations for establishing a governance framework within the airports, with the aim of improving organizational efficiency.