Efficiency and Growth of Ethiopian Air Transport Industry (Frontiers in African Business Research)

This book evaluates the efficiency and growth of the Ethiopian air transport sector through careful analysis. It provides essential research input for air transport industry practitioners in planning and resource management as well as for academics of advanced efficiency analysis who need to work and study in airports and the airline industry. The book analyzes the theoretical and practical implications of air transport growth determinants, airports' cost and production efficiency, including labor use efficiency by taking their respective determinant factors. The findings and policy implications of each research work provide important inputs for government policymakers and air transport planners to consider the causality of economic growth versus airlines growth and other determinants, to take lessons on the proper resource allocation in the application of airport cost and production efficiency, human capital, investment cost, price of capital, and labor inputs during the development and expansion of airports and airlines. This book is the first of its kind on the Ethiopian air transport industry and serves as a much-needed reference for the African air transport industry as well as other developing countries in terms of airport costs, production, labor use efficiency and airline growth perspectives. Preface Acknowledgements Contents Acronyms List of Figures List of Tables 1 Introduction to and Summary of Research on “Efficiency and Growth of Ethiopian Air Transport Industry” 1.1 Introduction 1.1.1 Background 1.1.2 The Rationale for the Research 1.1.3 Empirical Issues and Data Sources 1.1.4 Contributions of This Research 1.1.5 Policy Recommendations 1.1.6 Limitations and Guidelines for Future Research 1.2 Performance Overview of Ethiopian Airlines and Airports 1.2.1 Status of Ethiopian Airports 1.2.2 Traffic Trends 1.2.3 Growth Trends in Aircraft Types and Numbers 1.2.4 Brief Financial Status of Ethiopian 1.2.5 Trends in Worldwide Networks 1.2.6 Ethiopian’s Flights to China 1.2.7 Ethiopian’s Flights to African Countries 1.3 Summary of Each Paper Annexure References 2 An Analysis of the Cost Efficiency of Ethiopian Airports 2.1 Introduction 2.2 Literature Review 2.2.1 Theoretical Literature 2.2.2 A Generalization of the SFA Models 2.2.3 Empirical Applications of the Models to the Airport Industry 2.3 Dataset and Model Specifications 2.3.1 Data and Description of Variables 2.3.2 Input Prices of Airport Services 2.3.3 Airport Services 2.3.4 Passengers and Freight Cargo 2.3.5 Airport Facilities and Services 2.4 Model Specification and Efficiency Measurement Approaches 2.5 Analysis and Discussion of the Estimation Results 2.5.1 Output and Inputs Price Elasticities 2.5.2 Efficiency of Airports 2.6 Summary and Conclusions References 3 An Analysis of the Production Efficiency of Ethiopian Airports 3.1 Introduction 3.2 Brief Growth Trend of Aviation Industry in Ethiopia 3.3 Literature Review 3.3.1 Stochastic Frontier Functions 3.3.2 Applications to the Aviation Industry 3.4 Data and Model Specifications 3.4.1 Dataset and a Description of the Variables 3.4.2 Model Specification Framework 3.5 Estimation and Discussion of the Results 3.6 Summary, Conclusion, and Recommendations References 4 Labor Use Efficiency of Ethiopian Airports 4.1 Introduction 4.2 Literature Review 4.3 Data and a Description of the Variables 4.3.1 Output data’s Definitions 4.3.2 Input data’s Definitions 4.4 The Empirical Input Requirement Frontier Model 4.5 Panel Data Labor Use model’s Specification and Estimation 4.6 A Discussion of the Results 4.6.1 Fixed-Effects model’s Estimation 4.6.2 Model Separating Labor Use Persistent and Transitory Inefficiency Components 4.6.3 An Analysis of the Results of the MLE Estimation Model (Model 3) 4.6.4 Robustness Test for the Stochastic Frontier Efficiency Models 4.7 Summary, Conclusion, and Recommendations References 5 Growth Determinants of Ethiopian Air Transport 5.1 Introduction 5.1.1 Background of the Study 5.1.2 Rationale for the Study 5.2 Literature Review 5.2.1 Theoretical Literature 5.2.2 Empirical Literature 5.3 Model Specification and Estimation Techniques 5.3.1 Econometric Modelling of Air Transport Demand 5.3.2 The Data 5.3.3 Estimation Methods 5.4 The Empirical ARDL Model’s Specification 5.4.1 General Concept of the ARDL Framework 5.4.2 ARDL model’s Specification for the Growth Determinants of Ethiopian Air Transport 5.5 Empirical Results 5.5.1 Unit Root Test’s Results 5.5.2 Estimation of Long-Run OLS and SUR Models 5.5.3 Bounds Cointegration Test 5.5.4 Estimation of Long-Run and Short-Run Dynamics Using the ARDL Approach 5.5.5 Pairwise Granger Causality 5.5.6 Model Diagnostic and Stability Tests 5.5.7 Summary of the Estimation Results of the Alternative Models 5.6 Summary, Conclusion, and Recommendations References Appendix