A DEA Approach to Efficiency Analysis of Major Indian Airports

Airports’ technical effectiveness contributes to the expansion of the aviation industry. Airports offer enormous potential for any economy. There is a recent initiative by the government to privatize airport operations in India. Private airports need to be technically and operationally efficient in order to be profitable. Data Envelopment Analysis (DEA) is a frontier technique used to assess the technical efficiency of airports. This study uses DEA to evaluate the technical efficiency of 20 major airports in India. It considers the average spending of the airport, the size, the number of parking bays and the runways as the input variables, and average passenger, average revenue, average aircraft movements and freight as output variables. The result observed reflects an increasing return to scale in 10 airports, a decreasing return in 2 airports and a constant return to scale in 8 airports. Malmquist Productivity Index (MPI) applied to measure the productivity index of airports. This index is further broken down into three components: Technical change, efficiency effects and scale effects. DEA implies the highest operational efficiency for Bangalore, Chennai, Cochin, Delhi and Mumbai airports with greater than unity value. By benchmarking airports for target setting and operation mechanisms, this study will support airport management with better decision-making tools.