Technical efficiency of mainstream airlines and low-cost carriers : New evidence using bootstrap data envelopment analysis truncated regression

Between 2001 and 2005, the US airline industry faced financial turmoil while the European airline industry entered a period of substantive deregulation. Consequently, this opened up opportunities for low-cost carriers to become more competitive in the market. To assess airline performance and identify the sources of efficiency in the immediate aftermath of these events, we employ a bootstrap data envelopment analysis truncated regression approach. The results suggest that at the time the mainstream airlines needed to significantly reorganize and rescale their operations to remain competitive. In the second-stage analysis, the results indicate that private ownership, status as a low-cost carrier, and improvements in weight load contributed to better organizational efficiency.

[1]  Tae Hoon Oum,et al.  COST COMPETITIVENESS OF MAJOR AIRLINES: AN INTERNATIONAL COMPARISON , 1998 .

[2]  Carlos Pestana Barros,et al.  Productivity drivers and market dynamics in the Spanish first division football league , 2011 .

[3]  Boaz Golany,et al.  Evaluation of deregulated airline networks using data envelopment analysis combined with principal component analysis with an application to Western Europe , 2001, Eur. J. Oper. Res..

[4]  Carlos Pestana Barros,et al.  Bootstrapped efficiency measures of oil blocks in Angola , 2009 .

[5]  M. A. Muñiz,et al.  Separating managerial inefficiency and external conditions in data envelopment analysis , 2002, Eur. J. Oper. Res..

[6]  R. Banker Estimating most productive scale size using data envelopment analysis , 1984 .

[7]  Robin C. Sickles,et al.  Competition and market power in the European airline industry: 1976-90 , 1997 .

[8]  Chenjie Yu,et al.  A PRODUCTIVITY COMPARISON OF THE WORLD'S MAJOR AIRLINES. IN: AIR TRANSPORT , 1995 .

[9]  Tae Hoon Oum,et al.  Air Transport Liberalization and Its Impacts on Airline Competition and Air Passenger Traffic , 2009, Transportation Journal.

[10]  Robin C. Sickles,et al.  Allocative distortions and the regulatory transition of the U.S. airline industry , 1986 .

[11]  Yaakov Roll,et al.  An application procedure for DEA , 1989 .

[12]  John Ruggiero,et al.  Non-discretionary inputs in data envelopment analysis , 1998, Eur. J. Oper. Res..

[13]  John Ruggiero,et al.  On the measurement of technical efficiency in the public sector , 1996 .

[14]  Badi H. Baltagi,et al.  Airline Deregulation: The Cost Pieces of the Puzzle , 1995 .

[15]  Zinan Liu,et al.  Evidence on market structure of the deregulated US airline industry , 1999 .

[16]  Rajiv D. Banker,et al.  Efficiency Analysis for Exogenously Fixed Inputs and Outputs , 1986, Oper. Res..

[17]  P. Forsyth Total factor productivity in Australian domestic aviation , 2001 .

[18]  A. Charnes,et al.  Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis , 1984 .

[19]  Chris Tofallis,et al.  Input efficiency profiling: An application to airlines , 1997, Comput. Oper. Res..

[20]  Robin C. Sickles,et al.  Time Series Analysis of Deregulatory Dynamics and Technical Efficiency: The Case of the U.S. Airline Industry , 2000 .

[21]  Carl A. Scheraga,et al.  Operational efficiency versus financial mobility in the global airline industry: a data envelopment and Tobit analysis , 2004 .

[22]  T. Coelli,et al.  Accounting for Environmental Influences in Stochastic Frontier Models: With Application to International Airlines , 1999 .

[23]  L. R. Christensen,et al.  Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ , 1984 .

[24]  M. Goto,et al.  Measurement of Dynamic Efficiency in Production: An Application of Data Envelopment Analysis to Japanese Electric Utilities , 2003 .

[25]  Timothy Coelli,et al.  An Introduction to Efficiency and Productivity Analysis , 1997 .

[26]  Hédi Essid,et al.  Measuring efficiency of Tunisian schools in the presence of quasi-fixed inputs: A bootstrap data envelopment analysis approach , 2010 .

[27]  Scott E. Atkinson,et al.  Estimation of Output and Input Technical Efficiency Using a Flexible Form and Panel Data , 1994 .

[28]  Robin C. Sickles,et al.  A nonlinear multivariate error components analysis of technology and specific factor productivity growth with an application to the U.S. Airlines , 1985 .

[29]  Subhash C. Ray,et al.  Resource-Use Efficiency in Public Schools: A Study of Connecticut Data , 1991 .

[30]  B. Jaumard,et al.  Measuring Hospital Performance in the Presence of Quasi-Fixed Inputs: An Analysis of Québec Hospitals , 2004 .

[31]  P. W. Wilson,et al.  Estimation and inference in two-stage, semi-parametric models of production processes , 2007 .

[32]  Carlos Pestana Barros,et al.  An evaluation of European airlines’ operational performance , 2009 .

[33]  Patrick Petit,et al.  Introducing regulation in the measurement of efficiency, with an application to the Canadian air carriers industry , 2010, Eur. J. Oper. Res..

[34]  M. Kenward,et al.  An Introduction to the Bootstrap , 2007 .

[35]  Bijan Vasigh,et al.  Sorenson Best Paper Award Recipient A TOTAL FACTOR PRODUCTIVITY BASED STRUCTURE FOR TACTICAL CLUSTER ASSESSMENT: EMPIRICAL INVESTIGATION IN THE AIRLINE INDUSTRY , 2005 .

[36]  Álvaro Costa,et al.  Airlines performance in the new market context: A comparative productivity and efficiency analysis. , 2008 .

[37]  Abraham Charnes,et al.  Measuring the efficiency of decision making units , 1978 .

[38]  M. Farrell The Measurement of Productive Efficiency , 1957 .

[39]  Tae Hoon Oum,et al.  Winning Airlines: Productivity and Cost Competitiveness of the World’s Major Airlines , 1997 .

[40]  Tae Hoon Oum,et al.  New evidences on airline efficiency and yields: a comparative analysis of major North American air carriers and its implications , 2005 .

[41]  Mark R. Greer Nothing focuses the mind on productivity quite like the fear of liquidation: Changes in airline productivity in the United States, 2000-2004 , 2008 .

[42]  Pierre Ouellette,et al.  Technological change and efficiency in the presence of quasi-fixed inputs: A DEA application to the hospital sector , 2004, Eur. J. Oper. Res..

[43]  Martin Dresner,et al.  PARTIAL PRODUCTIVITY MEASURES AND TOTAL FACTOR PRODUCTIVITY IN THE AIR TRANSPORT INDUSTRY: LIMITATIONS AND USES , 1992 .

[44]  Dipasis Bhadra,et al.  Race to the bottom or swimming upstream: Performance analysis of US airlines , 2008, Journal of Air Transport Management.

[45]  Robin C. Sickles,et al.  Airline efficiency differences between Europe and the US: Implications for the pace of EC integration and domestic regulation , 1995 .