Performance measurement: a review of airports

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Performance measurement: a review of airports Ian Humphreys a, * , Graham Francis b,1 a Transport Studies Group, Department of Civil and Building Engineering, Loughborough University, Loughborough LE11 3TU, UK b Performance Management Research Unit, Open University Business School, Walton Hall, Milton Keynes MK7 6AA, UK and Department of Accounting, Waikato Management School, Waikato University, New Zealand Abstract This paper considers the past, present and future of airport performance measurement. The authors examine the changing nature of the performance measurement of airports. Airport performance measures are important for day to day business and operational management, regulatory bodies, Government and other stakeholders such as passengers and airlines. Measurement systems have been forced to develop in response to changing organisational contexts. With pressures for change coming from changing ownership patterns, an increased commercial focus, regulation, rapid passenger growth, increased concern for the natural environment and technical innovation, the experiences shared and lessons to be learnt highlighted in this paper will be of interest to both academics and practitioners. Ó 2002 Elsevier Science Ltd. All rights reserved. 1. Introduction Complex and dynamic organisations such as inter- national airports provide a challenge in establishing an appropriate performance measurement system. The many interacting parts of airports; passengers, airlines, handling agents and surface transport service providers, in addition to the interests of the regional and national economy, complicate the development of performance measurement systems. Performance measurement is a critical management activity, both at the operational level of the individual airport and at the wider system level. This is particularly relevant given the impending review of airport charges and regulation of UK desig- nated airports by the Civil Aviation Authority and the Office of Fair Trading and international moves towards greater commercialisation. This paper considers the past, present and future of airport performance measurement through reflection on a series of related projects by the authors. These projects have been in the areas of; airport privatisation (see for example Humphreys, 1999; Humphreys and Francis, 2000; Humphreys et al., 2001); performance measure- ment in regulated industries (see for example Francis and Minchington, 1999; Francis and Humphreys, 2001) and benchmarking in air transport (see for example Francis et al., 1999). Evidence of the practical implica- tions from the viewpoint of airport professionals has been gathered from a number of major European air- ports on the strict condition that they remain anony- mous. The information was gathered through a series of face to face informal interviews during 2000. There are several reasons why airport managers and governments measure airport performance: to measure efficiency from a financial and an operational perspec- tive (Doganis, 1992), to evaluate alternative invest- ment strategies, to monitor airport activity from a safety perspective and to monitor environmental impact. Management require information to enable them to identify areas that are performing well and those where appropriate corrective action needs to take place. Gov- ernments typically require information to regulate airport activity. The airports customers will also be in- terested in assessing its performance. It is important to recognise that airlines are the key customers of airports and that the airlines act as an intermediary between the airport and passengers or freight shippers. Thus the different stakeholders will have varying performance in- formation requirements. The sort of performance mea- sures used will be contingent upon the stakeholdersÕ needs and the availability of information to them. * Corresponding author. Tel.: +44-1509-223422; fax: +44-1509- 223981. E-mail addresses: [email protected] (I. Humphreys), [email protected] (G. Francis). 1 Tel.: +44-1908-655888; fax: +44-1908-655898. 1471-4051/02/$ - see front matter Ó 2002 Elsevier Science Ltd. All rights reserved. PII:S1471-4051(02)00003-4 International Journal of Transport Management 1 (2002) 79–85 www.elsevier.com/locate/traman

Transcript of Performance measurement: a review of airports

Performance measurement: a review of airports

Ian Humphreys a,*, Graham Francis b,1

a Transport Studies Group, Department of Civil and Building Engineering, Loughborough University, Loughborough LE11 3TU, UKb Performance Management Research Unit, Open University Business School, Walton Hall, Milton Keynes MK7 6AA,

UK and Department of Accounting, Waikato Management School, Waikato University, New Zealand

Abstract

This paper considers the past, present and future of airport performance measurement. The authors examine the changing nature

of the performance measurement of airports. Airport performance measures are important for day to day business and operational

management, regulatory bodies, Government and other stakeholders such as passengers and airlines. Measurement systems have

been forced to develop in response to changing organisational contexts. With pressures for change coming from changing ownership

patterns, an increased commercial focus, regulation, rapid passenger growth, increased concern for the natural environment and

technical innovation, the experiences shared and lessons to be learnt highlighted in this paper will be of interest to both academics

and practitioners.

� 2002 Elsevier Science Ltd. All rights reserved.

1. Introduction

Complex and dynamic organisations such as inter-national airports provide a challenge in establishingan appropriate performance measurement system. Themany interacting parts of airports; passengers, airlines,handling agents and surface transport service providers,in addition to the interests of the regional and nationaleconomy, complicate the development of performancemeasurement systems. Performance measurement is acritical management activity, both at the operationallevel of the individual airport and at the wider systemlevel. This is particularly relevant given the impendingreview of airport charges and regulation of UK desig-nated airports by the Civil Aviation Authority and theOffice of Fair Trading and international moves towardsgreater commercialisation.

This paper considers the past, present and future ofairport performance measurement through reflection ona series of related projects by the authors. These projectshave been in the areas of; airport privatisation (see forexample Humphreys, 1999; Humphreys and Francis,

2000; Humphreys et al., 2001); performance measure-ment in regulated industries (see for example Francisand Minchington, 1999; Francis and Humphreys, 2001)and benchmarking in air transport (see for exampleFrancis et al., 1999). Evidence of the practical implica-tions from the viewpoint of airport professionals hasbeen gathered from a number of major European air-ports on the strict condition that they remain anony-mous. The information was gathered through a series offace to face informal interviews during 2000.

There are several reasons why airport managers andgovernments measure airport performance: to measureefficiency from a financial and an operational perspec-tive (Doganis, 1992), to evaluate alternative invest-ment strategies, to monitor airport activity from a safetyperspective and to monitor environmental impact.Management require information to enable them toidentify areas that are performing well and those whereappropriate corrective action needs to take place. Gov-ernments typically require information to regulateairport activity. The airports customers will also be in-terested in assessing its performance. It is important torecognise that airlines are the key customers of airportsand that the airlines act as an intermediary between theairport and passengers or freight shippers. Thus thedifferent stakeholders will have varying performance in-formation requirements. The sort of performance mea-sures used will be contingent upon the stakeholders�needs and the availability of information to them.

*Corresponding author. Tel.: +44-1509-223422; fax: +44-1509-

223981.

E-mail addresses: [email protected] (I. Humphreys),

[email protected] (G. Francis).1 Tel.: +44-1908-655888; fax: +44-1908-655898.

1471-4051/02/$ - see front matter � 2002 Elsevier Science Ltd. All rights reserved.

PII: S1471-4051 (02 )00003-4

International Journal of Transport Management 1 (2002) 79–85

www.elsevier.com/locate/traman

Examples of different purposes to which performancedata may be used include:

• Government––for economic and environmental regu-lation

• Airline––so they can compare costs/performanceacross airports

• Airports managers––to run their own business• Passengers––to assess how well they are served as

consumers• Owners/shareholders––to assess business perfor-

mance and the return on their investment

Forecasts that world air traffic would continue togrow at around 5% per annum and that the cost of air-port development to accommodate this growth wouldtotal $500 billion by 2020 (ACI, 2001), have led gov-ernments to consider ways of relieving themselves of thepotential financial burden of airport ownership.

Internationally more than 60 countries, in SouthAmerica, Australasia, Africa, Northern Europe and theUS, have introduced private interests into the opera-tion and ownership of airports. This paper will assessthe implications of changing ownership patterns forperformance measurement systems. The paper is dividedinto three sections, starting with the historical context ofperformance measurement at airports, secondly tracingcurrent developments and then finally considering pos-sible innovations for the future.

2. The past: public service measures

Until the mid-1980s airports were regarded as publicservice facilities, publicly owned, operated and subsi-dised for the benefit of the Nation or Region. Oftenairports were developed as objects of prestige by localand national government irrespective of their commer-cial viability (Humphreys, 1999). Performance measure-ment developed initially within this context. Performanceindicators were primarily used to assist in making pub-licly owned airports accountable to their governmentowners. The focus was placed on measuring the perfor-mance of airports and their roles within the wider airtransport system.

Measures that developed were based around the workload unit (WLU), defined as one passenger processed or100 kg of freight handled (Doganis, 1978). This measurewas adopted by the airlines around 20 years ago toprovide a single measure of output for passenger andfreight business (for example see CIPFA, 1980). Typicalmeasures used included: total cost per WLU; operatingcost per WLU; depreciation cost per WLU; labour costper WLU; WLU per employee; WLU per unit assetvalue; total revenue per WLU and aeronautical revenueper WLU. In the UK, annual airport performance re-

sults were collated on a national basis and made avail-able to the public by the Chartered Institute of PublicFinance and Accountancy.

Outputs related to freight throughput, and the re-sources used to generate that output, are very differentfrom those used to generate the equivalent outputs inpassenger terms. Differences include; the ground han-dling equipment used, the hours of operation, the av-erage age of aircraft and associated environmentalimpacts. These different outputs and inputs need mea-suring in their own right. There was little point inamalgamating the two areas other than to give anoverall financial result. Ultimately under the publicutility view of airports that prevailed the WLU wasaccepted but was of little use to airport management.

Operational performance was measured againstinternationally specified design and level of servicestandards. Many authors have specified the differentstandards (for example Ashford, 1988; Muller and Go-sling, 1991). Design standards were expressed in termsof the space offered to a user at each part of the airportfacility, i.e. square metres at each facility per passengerper hour (Ashford et al., 1995). This technique, bor-rowed and adapted from highway design, gave anaggregate view of passenger service levels within theairport terminal. Current developments in airport per-formance measurement are now considered.

3. The present: commercial pressures

The interview data revealed that the move towardsprivatisation and the new commercial emphasis at Eu-ropean airports has led to new performance measuresbeing introduced to reflect the changing managementgoals. New measures fall into three categories: financialmeasures to monitor commercial performance, measuresto meet the requirements of government regulators andenvironmental measures.

Commercial pressure from ownership forms that de-mand a degree of financial accountability have led manyairports to become more focussed on measuring opera-tional and business performance within the airportcompany. Operational performance measures that relatepassenger level of service to international standards arestill widely used. The major weakness with this type ofmeasure is that they are too crude. As Gosling (1999)highlights, there is a tension in data collection betweenwhat is easy to measure and what is useful to measurebut potentially more difficult. The level of service de-livered is contingent upon various passenger character-istics and a certain design may deliver totally differentlevels of service for passengers depending on the purposeand nature of their journey. The business passengers�view of a particular level of service will be vastly dif-ferent to the view of a passenger travelling on a package

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holiday. Park (1999) began to address this when he de-veloped a perception response model for level of servicethat contained a simple two-way segmentation betweenlong haul and short haul passengers.

Major airports have developed performance mea-sures beyond the WLU that reflect the operational needsunder the new commercial context for airports. Ulti-mately, the processing of the passenger has very differentdemands and rewards for an airport, particularly in thisever more commercial age of airport retailing. Freightdoes not spend money in the airport shops! Differentpassenger market types have different characteristicsregarding their propensity to spend money and theirspending preferences. One small UK regional airportreported to us to have tripled its retail space and initiallyhad poor spending levels because the shops were seen astoo high priced in relation to the quality offered. Newmanagement changed the retail offer to cater for thecharter holidaymaker, a market segment that accountedfor around 70% of that airports business. 2 As a result ofthis, revenue per square foot increased dramatically.Market segmentation of passengers by spending be-haviour is essential if the retail provision is to be effec-tively targeted and revenues from retail maximised.

Indicators such as commercial income per squaremetre of floorspace, concession income per passenger,non-aeronautical income per passenger, income peremployee and property income per passenger haveemerged. Interestingly Table 2 shows that non-aero-nautical income per passenger was deemed to be themost useful of the financial measures, in line with thetrend towards airport management adopting a morecommercial focus.

The financial orientation of airports is clearly shownby the increased presence of commercially based indi-cators (see Tables 1 and 2 below). These measures reflectthe diversification of the business under new commercialand privatised ownership structures and the subsequentmanagement drive to satisfy shareholders. Whilst tra-ditional WLU measures are present there is now also theinclusion of commercial concession and duty free in-come measures. As well as revenues, attention is paid tocosts (again not exclusively in terms of WLU) and theimpact of the organisation�s capital structure.

The relatively low use of total revenue per WLU(Table 2), and its rating as having a low usefulness tomanagers relative to other financial measures, couldreflect the lack of relevance to management of a finan-cial measure that combines two outputs (passengers andfreight) that have very different inputs (Humphreys and

Francis, 2000). WLU are perhaps more relevant asperformance measures for use by airlines rather thanairports who gain relatively little revenue from �belly-hold� freight activities compared to passengers.

A survey of the worlds 200 busiest passenger airports(Francis et al., 2001) provides an insight into the prev-alence and perceived usefulness of performance mea-sures. Extracts from this survey are shown in Table 2.

Airports have begun to benchmark their quality ofservice with each other. The world airports body, Air-ports Council International (ACI) has begun to facili-tate such comparisons and has produced a survey ofservice standards and measurements used at 120 of itsmember airports (ACI, 2000). However the tendency onoccasion is to measure what was easy to measure asopposed to what was useful. For example baggage de-livery time was one of the most used measures, yet re-spondents found this to be of relatively little use (meanof 1.5 on a scale of 1–5, see Table 2). Perhaps this is aprocess that managers feel depends on other factorssuch as handling agent employed, level of congestion,ramp handling efficiency. It would be interesting tofollow up exactly why this measure is considered as notuseful. Quality of signage was not used by a surprisinglylarge proportion of airports, possibly as a consequenceof the difficulty in assessing such qualitative informa-tion.

Other measures used are deemed to be useful to theairports that use them. An interesting point is the use ofcheck in waiting time as a measure by airports becausethis typically depends on the airline and how many staffthey allocate to this task and how many check-in desksthey rent from the airport. It is possible that this ismeasured by airport management to monitor airlinebehaviour and the implications of this for the levelof service delivered to passengers in the terminal andthe impacts on passenger flow and space requirementsat different parts of the terminal. Given expansion

2 Whilst at this airport 70% of passengers were charter it should be

noted that this is not the case for other airports. For example

Heathrow charter passengers only accounted for 122,000 of 62.3

million passengers in 1999/2000 (source CAA, 2000).

Table 1

FLAP groupa financial performance measures (source: authors)

Revenue Cost

Traffic income per passenger Staff cost/employee

Traffic income per WLU Passenger/employee

Traffic income per turnover % WLU per employee

Commercial income per passenger Staff cost per passenger

Concession income per passenger Staff cost per WLU

Duty and Tax free income per

international departing passenger

Other direct costs per

passenger

Other concession income per

passenger

Other direct costs per WLU

Property income per passenger

Property income per work load unit Unadjusted reported accounts

Profits/equity %

Debt/equity %

aThe FLAP group made up of representatives of Frankfurt, Lon-

don, Amsterdam, and Paris airports.

I. Humphreys, G. Francis / Transport Management 1 (2002) 79–85 81

pressures airport managers may need to monitor airlinebehaviour in order to manage the terminal efficientlynow and to assess future capacity requirements realis-tically.

Regulation of airport activity by Government andthe performance measures that accompany it can havedysfunctional effects. The case of BAA plc would tend toindicate that the regulation introduced as part of theUK�s privatisation policy and the impacts of this on theenvironment are in conflict. London Heathrow handlednearly 65 million passengers in 2000 and is the busiestinternational airport in the world (ACI, 2001). Regula-tion to protect users has placed a price cap on the levelof aeronautical charges and as a consequence Heathrowis one of the cheapest airports for the airlines to use.Increasing the aeronautical charges is likely to have alimited effect on suppressing traffic at the London air-ports because they only represent 5–7% costs, except inthe case of the no frills carriers and charter serviceswhen airport charges can play a more significant part(Doganis, 2001). However, given the favourable trafficvolumes and passenger yield at Heathrow, if aeronau-tical charges were increased the money could be used tomitigate some of the social and environmental impactsof air transport. This might make proposed airportexpansion more acceptable to the local community.

The price capping of London airports shows how theregulator can restrict the profits from traditional core(regulated) airport operations through a pricing mech-anism (RPI-X). These operations are often very differentfrom the traditional business of a company but may bebeing pursued in the interests of private shareholdersand could be building on their core competencies. Forexample BAA view retail as a core competency and, atHeathrow, have purposefully diversified their efforts intoincreased airport retail activity. The commercial pres-sure for increased retail activity within BAA�s terminalsmay conflict with the UK policy to maximise the use ofexisting airport capacity (HMSO, 1985). The need for anadditional terminal may be less pressing if the 448,000

square feet of retail space in the current four termi-nals was converted to passenger processing usage. Theseconsiderations are currently part of a wider UK airportspolicy consultation in response to the Department ofEnvironment Transport and the Regions document, TheFuture of Aviation (DETR, 2000).

The BAA have also diversified into property devel-opment, have purchased and managed a chain of hotelsand have entered a joint venture to develop and manageseven out of town shopping centres as part of theirstrategy to maximise their return to shareholders byfocusing on unregulated activities.

The UK example provides an indication of the pos-sible consequences of airport privatisation. The postprivatisation focus for airports includes: share perfor-mance, in addition to the traditional operational mea-sures, commercial activities such as concessions andretail; diversification of business into activities suchas property management and adaptation of businessstrategy to compensate for the role of the regulator(Humphreys, 1999). If properly regulated there may belittle reason why airports should not be privately owned.Given that governments no longer wish to finance air-port expansion, the most effective way forward is a formof privatisation or commercialisation. It is importanthowever that governments and regulators do not allowairport mangers to lose sight of their public service andenvironmental responsibilities and develop performancemeasures to ensure this.

4. The future: ensuring accountability to stakeholders

The future of performance measurement at airportsis likely to be driven by the forces of commercial busi-ness focus; increased responsiveness to targets set byregulators and increased sensitivity to environmentalstandards that protect communities around airports.Passengers make a variety of different demands on thecapacity offered by an airport, which in turn generate a

Table 2

Performance measures used by respondents

Performance measure Used (%) Not used (%) Do not know (%) Usefulness of measurea

Mean S

Income per passenger 85 13 2 4.2 0.8

Expenditure per passenger 85 13 2 3.9 1.1

Concession revenue per m2 78 22 0 4.1 1.0

Non-aeronautical income per passenger 77 19 4 4.3 0.8

Revenue to expenditure ratio 73 21 6 3.9 1.1

Capital expenditure per passenger 32 61 7 3.2 1.5

Baggage delivery time 78 22 0 1.5 0.6

Check in waiting time 69 31 0 4.4 0.7

Quality of signage/ease of finding way 62 36 2 4.5 0.8

Availability of trolleys 55 39 6 4.3 0.8

Source: Extracts from Francis et al. (2001).a Scale: 1 ¼ not useful to 5 ¼ very useful, S ¼ standard deviation.

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varied range of different revenues. The differences needto be accounted for and measures of performance cal-culated with respect to the different traffic segments.Once this has been achieved then meaningful cross-air-port comparisons of performance may be possible. It isinappropriate to consider outputs alone; the wider out-comes should also be considered. Smith (1993) has dis-cussed the difficulties associated with attempting tomeasure outcomes, as opposed to outputs.

Airports have traditionally been compared to theirpeers (Graham, 2001) but have now started to recognisethe potential for benchmarking against other airports toimprove their competitive position through the identi-fication and adoption of best practices (Centre for Air-port Studies, 1998). A comprehensive comparison ofairport service performance indicators from the per-spective of international passengers is published by TheInternational Air Transport Association (IATA) andincludes data from 57 of the world�s major airports(IATA, 2000).

These ratings offer a starting point from which air-port management can start to ask questions about per-formance levels. The extent to which airports analysethe processes that generate the rating figures and learnfrom best practice is likely to advance as a consequenceof the drive towards a more commercial business focus.An example of an innovative benchmarking approachwas BAA examining the processes used by WembleyStadium to handle large volumes of people and cars andapplying some of the lessons to its airport operation.

Highly quantitative methodologies such as data en-velopment analysis (DEA) and total factor productivity(TFP) have been applied to airports in order to measureinputs in relation to outputs. Parker (1997) appliedDEA to airports by measuring the technical efficiency(operation on the best practice frontier) of BAA. Parkershowed the variability of airport performance within theBAA group and measured the relative efficiency of dif-ferent decision-making units within each airport and thechanges in relative efficiency over time. TFP was usedprior to the privatisation of Australian airports to assessperformance. Graham (1999) noted that data compa-rability problems limited the application of TFP be-tween airports with different owners.

Two major European airports reported to us thatnoise restrictions to the operational day caused stackingof aircraft that may arrive prior to the lifting of thecurfew due to meteorological conditions en route. Al-though the stacking process relieves noise for commu-nities under the airport flight paths there is a negativeenvironmental impact of this activity in relation to in-creased levels of emissions from queuing aircraft. It ismore difficult to measure the consequences of emissions,but a conflict exists in that one measure to protect thecommunity from noise appears to be degrading thenatural environment from the perspective of increased

emissions. Performance measures need monitoring inorder to identify and correct for such dysfunctional ef-fects. Participation from the local community in theenvironmental performance measurement process mayoffer a mechanism to guard against such effects.

It is important to recognise that stacking of aircraftand the consequent implications for the environment isrelated to the available number of runway slots anddifferent levels of achieved runway productivity. Thisvaries across Europe, for example Gatwick has an airtransport movement (ATM) rate per hour of 47,whereas the old Athens airport, also a single runwayairport only achieved 30 movements per hour (Caves,1999). For parallel runway pairs, Heathrow achieves 81ATMs per hour compared to Frankfurt, 70, Copenha-gen, 76 and Brussels 60 (Caves, 1999). Variations inproductivity are dependent on the level of acceptabledelay at each and determined by the airport co-ordina-tion group that includes the airport, airlines and airtraffic service providers at each airport. Many factorssuch as traffic mix, runway separation, taxiway config-urations, local air traffic control radar capability andenvironmental restrictions contribute to the variationsin airport performance. Although Heathrow has thehighest maximum movement rate, this could be in-creased further if it was allowed to operate its runwaysin mixed mode (landings and takeoffs from the samerunway). Due to environmental restrictions related tocommunity response to aircraft noise runways are op-erated in the less efficient segregated mode (where onlylandings or takeoffs occur on one runway) and therunway for landing and for takeoff swap around at 3 pmeach day (Caves, 1999). This is an example of how op-eration to mitigate aircraft noise could be doing so at theexpense of environmental pollution.

A new set of performance measures has emerged inthe last decade driven by the increased environmentalsensitivity of local communities to the environmentalexternalities of airports. Airports have had to meet en-vironmental performance measures in order for gov-ernments to grant them permission to expand. Perhapsthe best example of this to date was Manchester Airportin the UK, where a suite of 34 environmental perfor-mance measures was developed in partnership withthe local community and planning authority as a pre-requisite to permission for a new runway. Measuresincluded: average water quality (concentration mg/l),number of contamination events, waste recycling (ton-nes), energy consumption (kWh/m2), share of journeysthat use public transport, noise measured by percentageof scheduled operations by chapter 2 aircraft, area af-fected by aircraft noise (area within 60 LA eq noisecontour� km2), noise track deviations (%), number ofbreaches of noise limits and number of communitycomplaints about airport activity. Certain targets needto be met for the airport to be able to continue to

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operate and expand. This has set a precedent for Eu-ropean airports and developments such as the proposedHeathrow Terminal 5 or any expansion of Frankfurtwill have to meet and maintain similar, or possibly morestringent standards.

A way of expanding the �FLAP� group measures(Table 1) could be to incorporate further measures re-flecting various stakeholders� interests. Environmentalmeasures such as those at Manchester Airport, alreadydiscussed could be adopted. Other measures that couldfurther reflect wider stakeholder interests that couldinclude security (perceived risk of incident by differentstakeholder groups and safety, measured by accidentsper number of operations and by deaths per number ofoperations). Italian airports Milan Malpensa and RomeFiumicino both have to issue operational and environ-mental performance measures by law for accountabilityto their stakeholders.

To extend the performance measurement of activities,service satisfaction measures could be applied to thedifferent airport users (passengers, visitors, tenants,Government agencies, freight shippers). Canadian air-ports have pioneered an approach whereby the 14 majorelements of their airports were each measured againstvarious performance criteria and rated on a scale of 1–5(for example Baggage claim was rated for categoriessuch as: adequate signage, travel information, cleanli-ness, �feel safe and secure�, delays, crowding and numberof baggage carts) (Braaksma and Bell, 2000).

A particular problem faced by airports is that ofcompeting and conflicting performance measures. Forexample the drive to raise commercial income levels mayconflict with environmental goals by generating moresurface access trips from non-passengers wishing to ac-cess retail facilities. In Europe airports raise around12.8% of their income from car parking revenue (ACI,1999), yet at European airports there is increased pres-sure to reduce the number of passengers using carfor the airport access trip. Several airport managers in-terviewed spoke about the conflict between creatingshareholder value and meeting environmental targets.One possible way of trying to address competing per-formance measures is to use multiple measures as ad-vocated by Eccles (1991) potentially in the form of abalanced scorecard as advocated by Kaplan and Norton(1992, 1996). Fitzgerald et al. (1991) suggested serviceorganisations differed in nature to other organisationsand thus should have different performance measure-ment systems. However it is important to considerwhether it is appropriate to prioritise different measures.Can a balanced scorecard be developed to take intoaccount the conflict between commercial goals, opera-tional goals and environmental goals? The output is, intheory, supposed to be balanced, but in practice airportmanagers may focus on measures that are most impor-tant to them.

A number of airport managers interviewed expressedthe need for continued vigilance and awareness tomaintain operational safety standards. Establishing or-ganisational priorities in terms of commercial pressuresand shareholder value, verses issues surrounding safetyand the environment is an important issue within thecorporate governance of airports.

5. Conclusions

Performance measurement at airports has evolved ina dynamic environment. Pressures for innovation havecome from the introduction of new forms of ownership,regulation related to ownership context, rapid growth intraffic and technical innovation. Thus it is unsurprisingthat many measures require improvement to improvetheir usefulness to governments, regulators and airportmanagers. In the traditional suite of performance mea-sures, the emphasis has been what is simple to measure.These measures must now be developed in order to de-liver the quality of information required by those con-cerned with the airport industry.

Changing ownership patterns have created a greateremphasis on commercialisation and has led to theintroduction of more financial (shareholder) orientedmea-sures that are seen as being consistent with maxi-mising shareholder wealth. This may result in shiftingmanagerial attention to what were traditionally seen asnon-core activities. Privatisation and the inherent com-mercialisation will increasingly impact on airport oper-ations potentially at the expense of other stakeholders.

The authors believe that it is vital that regulators havesufficient information in order to monitor and maintainenvironmental and safety standards, particularly in thecontext of increased commercial pressure. However theirability to undertake such responsibilities may largely bedetermined by the degree of authority they are grantedand the nature and form of the performance measuresthat they have at their disposal. The continued review ofindicators and their application is desirable given thedynamic context in which they are to be used. Airportsare important contributors to the economies of thecountries they serve. The degree of effectiveness andthe national implications of airports will depend on thenature and the use of performance indicators by the fullrange of stakeholders.

Acknowledgements

The authors would like to acknowledge the financialsupport from the Performance Management ResearchUnit, Open University Business School. We would liketo thank the following for their assistance: Dr Jackie Fryand Dr Jacky Holloway at Open University BusinessSchool, Dr Robert Caves, Transport Studies Group,

84 I. Humphreys, G. Francis / Transport Management 1 (2002) 79–85

Loughborough University. We would also like to thankthe Anonymous reviewers for their constructive com-ments and EGCH.

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