Evaluating the efficiency of global airlines: A new weighted SBM-NDEA approach with non-uniform abatement factor

Abstract

Over the past decade, issues related to environmental controls in the airline industry have arisen, attracting increased attention from policy and decision makers. Several global initiatives, including the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and the European Union Emissions Trading System (EU-ETS), have been proposed to reduce carbon dioxide (CO2) emissions. As passenger numbers grow, airlines could become one of the largest contributors to global warming. In practice, airline operations involve a series of network processes, and these processes can be grouped into two subprocesses: a) production and b) airline services. Based on our literature review, only a few studies have examined the efficiency of airlines using network data envelopment analysis (NDEA) instead of the conventional data envelopment analysis (DEA) framework (also known as the black-box approach). In addition, the traditional treatment of undesirable outputs (e.g., CO2 emissions) in the DEA approach involves the use of a single abatement factor to reduce both undesirable and beneficial outputs. Performance assessment using this weakly disposable Shephard technique may overestimate the technical efficiency of the evaluated units. The main objective of this study is to investigate the performance of the two subprocesses of global airlines by incorporating CO2 emissions using multiple abatement factors based on the Kuosmanen technology. To capture different airline groupings, we use a network DEA model to estimate the technical efficiency of global airlines in alliance and non-alliance groups. A sample of 29 global airlines in 2018 is used in the study. The results reveal that the main source of overall technical inefficiency of most airlines is scale inefficiency in both production and airline services.