The specification of aircraft operations in airports' cost function: The problem of aggregation

Abstract

This work deals with the specification of aircraft operations (ATMs) as an output in the estimation of airports' cost function. The consideration of ATMs leads to a problem of output separation because different aircraft impose different costs on the infrastructure. Furthermore, this paper provides empirical evidence that the specification of a plain aggregation of ATMs in the cost function biases the estimation of the degree of scale economies in the industry. The ideal approach to solve this problem is to treat each aircraft model as a different output, but this is not econometrically viable. Thus, this paper discusses the standardisation of ATMs as an alternative solution, using the aircraft's Maximum Take-off Weight (MTOW) as a proxy for runway usage.