The Measurement of Airlines Efficiency
Keywords:
Operating Efficiency, Measurement Efficiency, Airlines EfficiencyAbstract
The objective of this study was to analyze the operating efficiency of ten airlines, comprising Star Alliance Group, Aegean Airlines, Air Canada, Air China, Air New Zealand, All Nippon Airways, Copa Airlines, Croatia Airlines, Lufthansa, Thai Airways and Turkish Airlines, in the period of 2010 to 2014 paying particular emphasis to technical efficiency and operating efficiency indeces. The methodology for measuring efficiency involved Data Envelopment Analysis (DEA) under a BCC Model (input – oriented) focusing on seven variables for analysis, five inputs and two outputs. The inputs were made up of personnel expenses, aircraft fuel, maintenance expenses, available ton kilometers and assets; while the outputs were composed of revenue passenger kilometers and passenger revenue. In addition, Du Pont Analysis was employed to analyze financial efficiency through Return of Equity ratios involving four variables under analysis; Net Profits, Sales, Total Assets and Equity.
The results from the DEA revealed which airlines were functioning efficiently in terms of technical and operational considerations during the period 2010 - 2014. AI Inefficient airlines could potentially improve their inputs and outputs by following the reference sets outlined. The results from the Du Pont Analysis yielded informative data on the relative operational efficiency of business activities for the airlines concerned in comparison with industry benchmarks.
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