Estimating the marginal costs of airport operation using multivariate time series models with correlated error terms

This paper explores insights about marginal airport costs that can be gained by analysing labour inputs and their variability. Based on hourly cost and traffic data for the airport of Helsinki, a multivariate time series approach is used incorporating correlated error terms to account for random shocks such as delays. We found for most airport services a linear relationship between labour input and aircraft movements, except for producing passenger services for international departing flights where a cubic cost relationship was estimated. The findings are comparable with earlier studies for US airports. (c) 2008 Elsevier Ltd. All rights reserved