Efficiency of Peruvian regional airports: Does the PPP framework make a difference?

This paper examines whether Public-Private Partnership (PPP) frameworks have improved the technical efficiency of Peruvian regional airports. Using panel data from 17 airports between 2004 and 2017, we estimate a Latent Class Stochastic Frontier Model (LCSFM) based on an input-oriented Cobb-Douglas distance function, which is explicitly controlling for unobserved technological heterogeneity. Airports are classified into two technological groups, with concessionaire status (AdP) serving as a separating variable. Results reveal that airports managed under PPP schemes achieve higher efficiency levels and are more likely to operate with superior technology, with both groups exhibiting increasing returns to scale. Evidence of technological progress, biased towards operational expenditures, suggests that efficiency gains have been driven by labour innovations, outsourcing, and digitalization. These findings highlight the positive role of PPPs in fostering operational improvements and underline the risks of ignoring heterogeneity in regulatory benchmarking. We argue that incorporating heterogeneity-adjusted models into regulatory frameworks could strengthen incentive-based policies, guide infrastructure investments more effectively, and support sustainable development of regional air transport networks. • A Latent Class Stochastic Frontier Model (LCSFM) to account for technological differences is used. • Public-Private Partnership (PPP) frameworks have improved efficiency of regional airports • Heterogeneity-adjusted models could strengthen incentive-based policies