Efficiency analysis of major airlines: Exploring the operational performance determinants in aviation

Abstract

This paper evaluates the performances and dynamics of productivity changes of 38 airlines from different regions of the world between 2015 and 2019, assessing the effects of business model, alliance membership, the economic development level of the home country, and size on the operational performance of the airlines. In this regard, first, constant returns to scale (CRS) and variable returns to scale (VRS) input-oriented data envelopment analysis (DEA) models with three inputs and two outputs are implemented. The input-oriented CRS model super-efficiency DEA is also used to discriminate between efficient airlines. The Malmquist Productivity Index (MPI) estimates efficiency dynamics across time. Further, the determinants of operational efficiencies are assessed by applying Mann-Whitney rank-sum tests. The analysis results show that most airlines suffer from scale inefficiency. MPI signifies productivity deterioration in airlines’ performance. It is found that low-cost carriers (LCC) have performed better than full-service carriers and alliance member airlines are less efficient than non-member airlines. Additionally, developed country airlines show better performance than their emerging country counterparts. Lastly, the size of airlines measured in available seat kilometers (ASK) is found to have no statistically significant effect on performance.