Motivating air navigation service provider performance

Abstract The ownership form of Air Navigation Service Providers varies across countries, ranging from state agencies belonging to the Department of Transport, to government-owned corporations, to semi-private firms with for-profit or not-for-profit mandates. This research focusses on the link between the performance of ANSPs and their ownership form. Economic theory suggests that effort to achieve cost efficiency will be higher in the case of public companies with a board of stakeholders composed of airspace users and in the case of private companies with-stakeholders that are also shareholders. A stochastic frontier analysis estimation of the production and cost functions of 37 European air navigation service providers over nine years suggests that the public-private ownership form with stakeholder involvement achieves statistically significantly higher productive and cost efficient en-route levels compared to either a government corporation or a state agency. We also find substantial levels of inefficiency across the European air traffic control market.