Production and Marketing Efficiencies of the U.S. Airline Industry: A Two-Stage Network DEA Approach

Abstract

This chapter presents an application of a two-stage network data envelopment analysis (DEA) for examining the performance of 30 U.S. airline companies. The airline industry is a subject of concern because the industry is a major contributor to a country’s or even global economic development. Although a number of studies have explored airline performance using DEA, relatively few studies have applied a two-stage DEA model. The current chapter examines production efficiency and marketing efficiency through an additive two-stage network DEA model. This approach allows the black-box of the performance measurement process to be assessed, thus, providing a new direction in measuring airline performance. The chapter includes a managerial decision-making matrix and makes suggestions to help airline managers improve performance for airlines. In addition, a regression analysis of the effect of corporate governance mechanisms on airlines performance is conducted. Given the volatility of growth in the airline industry, it is expected that we will see more research related to performance management in the industry.