Productivity changes of Asia-Pacific airlines: A Malmquist productivity index approach for a two-stage dynamic system

Abstract

To track and explain the productivity changes of Asia-Pacific airlines during their boom times, this study develops a Malmquist productivity index for a two-stage dynamic production system. Our proposed index derives a direct relationship between the productivity changes of the airline's system and its stages while capturing the system's dynamism throughout the period. Furthermore, it demonstrates the connection between changes in the technology and efficiency of the system and stages. The empirical results indicate a great diversity in the efficiency levels and productivity changes of the airlines. In general, most airlines showed constant improvement in their productivity over time, which was supported by either technology innovation or the ability to adapt to the changing technologies. During the period, low utilization of resources appeared to be a more prominent cause for the inefficiency in the airlines’ system. The airlines, however, gradually and deliberately addressed this issue. Based on these findings, some implications are proposed to promote the productivity growth of airlines in Asia-Pacific.