The impact of strategic management and fleet planning on airline efficiency - A random effects Tobit model based on DEA efficiency scores
As a result of the liberalisation of airline markets; the strong growth of low cost carriers; the high volatility in fuel prices; and the recent global financial crisis, the cost pressure that airlines face is very substantial. In order to survive in these very competitive environments, information on what factors impact on costs and efficiency of airlines is crucial in guiding strategic change. To evaluate key determinants of 58 passenger airlines' efficiency, this paper applies a two-stage Data Envelopment Analysis (DEA) approach, with partially bootstrapped random effects Tobit regressions in the second stage. Our results suggest that the effects of route optimisation, in the sense of average stage length of the fleet, are limited to airline technical efficiency. We show that airline size and key fleet mix characteristics, such as aircraft size and number of different aircraft families in the fleet, are more relevant to successful cost management of airlines since they have significant impacts on all three types of airline efficiency: technical, allocative and, ultimately, cost efficiency. Our results also show that despite the fuel saving benefits of younger aircraft, the age of an airline's fleet has no significant impact on its technical efficiency, but does have a positive impact on its allocative and cost efficiency.
Volume (Year): 45 (2011)
Issue (Month): 7 (August)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barbot, Cristina & Costa, Ãlvaro & Sochirca, Elena, 2008. "Airlines performance in the new market context: A comparative productivity and efficiency analysis," Journal of Air Transport Management, Elsevier, vol. 14(5), pages 270-274.
- Ouellette, Pierre & Petit, Patrick & Tessier-Parent, Louis-Philippe & Vigeant, Stéphane, 2010. "Introducing regulation in the measurement of efficiency, with an application to the Canadian air carriers industry," European Journal of Operational Research, Elsevier, vol. 200(1), pages 216-226, January.
- SIMAR, LÃ©opold & WILSON, Paul, 1995.
"Sensitivity Analysis to Efficiency Scores : How to Bootstrap in Nonparametric Frontier Models,"
CORE Discussion Papers
1995043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Léopold Simar & Paul W. Wilson, 1998. "Sensitivity Analysis of Efficiency Scores: How to Bootstrap in Nonparametric Frontier Models," Management Science, INFORMS, vol. 44(1), pages 49-61, January.
- Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
- Oum, Tae Hoon & Yu, Chunyan, 1998. "Cost competitiveness of major airlines: an international comparison," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(6), pages 407-422, August.
- Simar, L. & Wilson, P.W., 1998.
"A General Methodology for Bootstrapping in Nonparametric Frontier Models,"
9811, Catholique de Louvain - Institut de statistique.
- Leopold Simar & Paul Wilson, 2000. "A general methodology for bootstrapping in non-parametric frontier models," Journal of Applied Statistics, Taylor & Francis Journals, vol. 27(6), pages 779-802.
- Bhadra, Dipasis, 2009. "Race to the bottom or swimming upstream: Performance analysis of US airlines," Journal of Air Transport Management, Elsevier, vol. 15(5), pages 227-235.
- Tsionas, Efthymios G. & Papadakis, Emmanuel N., 2010. "A Bayesian approach to statistical inference in stochastic DEA," Omega, Elsevier, vol. 38(5), pages 309-314, October.
- R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
- Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
- Gillen David, 2006. "Airline Business Models and Networks: Regulation, Competition and Evolution in Aviation Markets," Review of Network Economics, De Gruyter, vol. 5(4), pages 1-20, December.
- Barros, Carlos Pestana & Peypoch, Nicolas, 2009. "An evaluation of European airlines' operational performance," International Journal of Production Economics, Elsevier, vol. 122(2), pages 525-533, December.
When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:45:y:2011:i:7:p:686-695. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.