Target setting for airlines incorporating CO2 emissions: The DEA bargaining approach

Abstract

Long-term sustainability in airline transportation entails mitigating the detrimental impact of CO2 emissions on the environment. However, it is also necessary that it does not affect the airlines' performance. In this regard, it is important to achieve optimal and efficient targets by inputs, good outputs, and undesirable outputs. The purpose of this study is to compute the input and output targets using the bargaining approach for a sample of major global airlines for the period 2018. This has been undertaken utilising the proposed data envelopment analysis (DEA)-based Nash bargaining model wherein its novelty lies in incorporating weakly disposable undesirable outputs. This model achieves reasonable and optimal targets for not just inputs and outputs but also for undesirable outputs by carrying out an unbiased, rational negotiation between the inputs and outputs. The results show that weakly efficient airlines attain the optimal targets by improving their environmental performance and inefficient airlines can achieve their input/output targets by carrying out an unbiased, rational negotiation between the inputs, good outputs, and bad output. The policy implications emanating from the findings have also been highlighted.