Airline efficiency and environmental impacts – Data envelopment analysis

Abstract

Airline efficiency has been a research interest for decades. While early airline efficiency research focused primarily on revenue generation and profitability, growing airline social responsibility is driving greater investment into understanding and improving the environmental impact on airline efficiency. This study developed a two-phase, two-stage model using a data envelopment analysis (DEA) approach to simultaneously evaluate airline operations for available seat mile (ASM) generation, revenue passenger mile (RPM) generation, carbon dioxide emissions abatement, and revenue generation on a sample of thirteen airlines. Efficiency evaluation was performed for the years between 2013 and 2015, between U.S. and non-U.S. carriers, and between full-service carriers (FSCs) and low-cost carriers (LCCs). Results indicated more accurate measurement of airlines’ overall efficiency using the proposed DEA model, which included operational and cost factors as input variables and environmental impact as both the input and output variables in the model. Service and environmental factors were found to be significant in determining airline efficiency, with environmental abatement affecting the overall efficiency of airline performance both inside and outside the U.S. when emission reduction effort was properly accounted for. The findings provided theoretical and managerial implications in the assessment of airline efficiency with a special emphasis on incorporating environmental impact in the overall evaluation.