Using DEA models to jointly estimate service quality perception and profitability – Evidence from international airports

• We combine perceived service quality and airport profitability indications for the first time.
• Bootstrapped two-stage output oriented DEA models provide the most robust estimates.
• Excluding quality as an output measure can seriously distort the true efficiency ranking of international airports.
• Airports in private ownership with high share of non-aeronautical in total revenues perform best.
• Share of LCC airline in total airline seats and region also matter for the single efficiency measure.

With increasing competition between airports and a growing share of non-aeronautical revenues, particularly at large international hubs, perceived quality and consumer satisfaction have not only become a key focus of management but potentially the most important tool to achieve or maintain a competitive advantage. However, in the long run stakeholders aim for profit maximisation and it has been shown for other parts of the aviation supply chain that quality does significantly impact on profitability. In this paper we aim to investigate whether perceived airport quality has an impact on airport profit margins. We further apply two-stage Data Envelopment Analysis (DEA) models to estimate a single efficiency measure that combines the potentially conflicting indicators of perceived service quality and profitability for the airport context. We also identify determinants of the jointly estimated single quality/profitability measure.