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Estimating the confidence intervals for DEA efficiency scores of Asia-Pacific airlines

Author

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  • Thanh Ngo

    (Massey University)

  • Kan Wai Hong Tsui

    (Massey University)

Abstract

Data envelopment analysis (DEA) is a popular non-parametric approach to examine performance and productivity of airlines; however, it could not provide statistical information such as confidence intervals on the estimated efficiency scores. We combined stochastic frontier analysis and DEA into a single framework to disentangle noise and ‘pure’ inefficiency from the DEA inefficiency scores and accordingly provide confidence intervals for the estimated efficiency scores. Monte-Carlo simulation verified that our novel model is a good alternative for the conventional DEA as well as the bootstrap DEA. Empirical application using Asia-Pacific airlines’ data (2008‒2015) shows that after accounting for the ‘pure’ random errors, the sampled Asia-Pacific airlines performed well during the study period but their ‘pure’ efficiency was declining, hence, there is still room for improvement.

Suggested Citation

  • Thanh Ngo & Kan Wai Hong Tsui, 2022. "Estimating the confidence intervals for DEA efficiency scores of Asia-Pacific airlines," Operational Research, Springer, vol. 22(4), pages 3411-3434, September.
    • Handle: RePEc:spr:operea:v:22:y:2022:i:4:d:10.1007_s12351-021-00667-w
    DOI: 10.1007/s12351-021-00667-w
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