Integrated airline productivity performance evaluation with CO2 emissions and flight delays

This paper evaluates the airline productivity change by applying a modified global Malmquist productivity index (GMPI) model, incorporating both CO₂ emissions and flight delays. Statistical inference is also performed on the GMPI results using the bootstrapping method. Empirical research was conducted on 15 international airlines during 2011-2017. The obtained results showed that the productivity of all airlines had been fluctuating and experienced a slight increase over 2011–2017. Most of these 15 airlines made more progress in managing punctuality than CO₂ emissions. High punctuality policy may not be the best choice for all airlines when considering financial constraints, while airlines in more liberalized aviation markets are more likely to improve productivity by reducing flight delays. Efficiency change and technological change were the major driving factors for the growth of airline productivity. European and US airlines benefitted more from superior technology, while most Asian and Oceanian airlines still benefitted from the advantage of efficiency. Based on the findings, specific management advice was given.     

Including aviation emissions in the EU ETS: Much ado about nothing? A review

The European Community, motivated by the rapid growth of the aviation industry and related impacts on climate change, has decided to include aviation in the European Emissions Trading Scheme (EU ETS). Mitigation policies such as the EU ETS are considered to be necessary in order to change travel behaviour and induce operational and technological changes in the aviation industry that will result in lower environmental impacts. This paper reviews the available impact assessments of the proposed emissions trading scheme for airlines published between 2005 and 2009. It analyses the methods used and finds that the models used are often over-simplified, omitting important variables or that the reliability and robustness of the modelling results are reduced by linking models that are based on different assumptions. The paper also summarises the possible environmental (CO₂ emissions) and economic (air fares, demand for airline services, supply of airline services, competitiveness, GDP, carbon price) impacts in the studies reviewed for the year 2020. Overall, the effects are found to be small: for example, CO₂ emissions are expected to decline by a maximum of 3.8% and the maximum impact on GDP in the EU was found to be ?0.002%. The reasons for these insignificant impacts are analysed in this paper; it is also found that there are some positive aspects of including aviation in the EU ETS.     

A voice in the skies: Listening to airline passenger preferences

This study aims to identify the impact levels and priorities in the service expectations that passengers have when identifying a preferred airline. The results are based on probabilities and impacts, and can help airlines to accurately understand the preference criteria of their passengers. The priorities of the passengers may differ according to the airline chosen; therefore, the probabilities shown in this study can inform senior airline managers about the passenger perspective. This study uses the Stochastic Multicriteria Acceptability Analysis-2 (SMAA-2) method. SMAA-2 identifies the priorities and impact levels of passengers’ expectations on airline selection, and the ranking of alternative firms according to the probability. According to the obtained results, Airline 3 (AF₃) is the most preferred airline with the highest confidence rate. This airline operates based on a low-cost model that allows passengers to choose additional services for additional charges. The passenger expectations that have the highest impact on the preference when selecting an airline are 1) ticket prices, 2) punctuality, and 3) booking convenience. Free in-flight food and beverages, the variety and quality of the food and beverages, and voyager miles programs for loyal customers are found to have no impact on the ranking of airlines. The expectations identified by the passengers in this study are related to the outcome quality dimension, with services dominated by flexible features. The findings of this study define the passenger as a rational decision maker who is price sensitive.     

Price dispersion,competition, and the role of online travel agents: Evidence from business routes in the Italian airline market

In this article, using data from the Italian airline market, we study the role of online travel agents (OTAs) in driving price dispersion as compared to the effect of airlines’ websites. Specifically, we investigate how distinctive factors between OTAs and airlines’ direct channels influence price dispersion. We find that after controlling for OTAs’ features related to airline competition, price dispersion should be lower in the OTA channel relative to airlines’ direct channels. On the other hand, we also find that OTAs’ features related to the presence of airline competition play in favor of higher price dispersion in such indirect channel.     

An analysis of the greenhouse gas emissions profile of airlines flying the Australian international market

International commercial flights (with the exception of flights between countries in European Union including Iceland, Norway and Liechtenstein) are currently not subject to greenhouse gas emission reduction regulation. To formulate effective and efficiency policy to manage greenhouse gas emissions from air transport, policy makers need to determine the emissions profiles of all airlines currently flying into their country or region. In this paper, we use 2012 data on airlines' aircraft characteristics, passenger load and cargo load (obtained from statistics reported by Australian Government Bureau of Infrastructure, Transport and Regional Economics) to estimate the volume and carbon efficiency on each international route flying to and from Australia. This is the first study to use actual passenger and cargo load data to determine the greenhouse gas (specifically CO₂) efficiency of airlines operating in the Australian international aviation market. Airlines' CO₂ emission profile is dependent on many factors including but not limited to the aircraft used, payload, route taken, weather conditions. Our results reveal that the airlines’ CO₂ emission profile is not only dependent on the aircraft used and the number of passengers but also the amount of cargo on each flight.     

Airline choice by passengers from Taiwan and China: A case study of outgoing passengers from Kaohsiung International Airport

Understanding what factors passengers consider when selecting an airline is critical, as airlines can utilize this information in market segmentation and marketing strategies. However, few studies have explored how passenger demographics and the nationality/type of carrier (full service or low-cost; regional or international) affect the choice factors of passengers when selecting airlines. The main objective of this study was to explore the airline choice factors considered by passengers, compare the choices of passengers with different demographics, and analyze which factors are emphasized by passengers from Taiwan and China when selecting airlines. We conducted a questionnaire survey of outgoing passengers at Kaohsiung International Airport in relation to 22 factors underlying their choice of airline. Using factor analysis, we identified the five factors: ground services, convenience, in-flight services, price, and travel availability. We then utilized cluster analysis to identify four groups, each concerned with price, comfort, convenience, and ground services, respectively. Nationality, age, income, flying frequency, and purpose of travel lead to differences in deciding which factors were considered by cross-strait passengers. Passengers of different nationalities concerned with different factors when selecting airlines. Our findings can add to the completeness of existing research as well as provide airlines with reference in developing marketing strategies for different customer groups.     

Will the EU-ETS instigate airline network reconfigurations?

Based on the proposal of the European Commission on including the aviation sector into the European Emission Trading Scheme, a route-based analysis is conducted simulating cost and demand implications for selected airlines. For a scenario of €20/tons CO₂, results indicate that the EU-ETS CO₂-based cost increases for the airlines are between €9 and €27 per route and therefore, as an individual factor, are not high enough to instigate major route reconfigurations among European airlines.     

Race to the bottom or swimming upstream: Performance analysis of US airlines

Data envelopment analysis is used to examine inter-temporal and peer group airline efficiency. Results for the US for 1985–2006 indicate that airline performance is converging over time. In particular, airlines inter-temporal inefficiency peaked earlier and then converged. Furthermore, using Tobit specifications it is seen that while demand intensity matters less in determining airlines inter-temporal inefficiency, their influence is stronger in determining peer group inefficiency. Block time, a representative of operational factors, tends to negatively impact airlines efficiency by imposing burdens on airline operations. Among the structural cost and revenue factors, fuel cost tends to affect inter-temporal inefficiency more robustly than it does to peer group efficiency. Labor pay tends to reduce inefficiency in case of inter-temporal while increasing peer group inefficiency. The events of September 11th had little or no impact on inter-temporal inefficiency but tended to reduce peer group inefficiency in a significant way. Finally, airlines efficiency tends to be robustly affected by block hours; reducing them increases efficiency.     

Limitations of DEA-based approach and alternative methods in the measurement and comparison of social efficiency across firms in different transport modes: An empirical study in Japan

This paper measures and compares social efficiency of railway firms and airlines in Japan’s domestic intercity travel market. Unlike other efficiency studies, our input and output measures are more comprehensive because we incorporate the life-cycle CO₂ emissions as an undesirable output and travelers’ time and government spending on air infrastructure as inputs. We use the nonparametric directional output distance function (DODF) together with the composite social efficiency index to analyze the yearly panel data of the three major railroads and two major airlines during 1999–2007. The results indicate that the railroads are more socially efficient than airlines. Furthermore, we discuss the inability of nonparametric DODF method for comparing the social efficiency of firms across modes.     

Does asset-light strategy contribute to the dynamic efficiency of global airlines?

This study analyses the effect of asset-light strategy on the dynamic efficiency of global airlines from 2008 to 2013. First, a dynamic data envelopment analysis is employed to estimate the dynamic efficiency of global airlines. Second, the degree of asset-lightness is computed by combining the concepts of the DuPont equation and financial ratios. Third, a multivariate analysis is performed to analyze the association between asset-light strategy and dynamic efficiency. The findings show that asset-light strategy significantly enables global airlines to have better corporate performance. Overall, this study suggests that global airlines should efficiently manage and allocate their light resources to sustain challenges in the dynamic global airline industry.     

Measuring the productivity changes of Chinese airlines: The impact of the entries of non-state-owned carriers

The competitive environment of the Chinese airline industry has experienced rapid change since non-state-owned airlines entered the market in 2004. We focus on measuring the productivity changes in the Chinese airlines, especially state-owned ones after this change. The results show that non-state-owned airlines are performing better than state-owned airlines. The productivity changes of state-owned airlines are mainly driven by technical changes before or after the entries of non-state-owned airlines. They have little efficiency improvement. However, the productivity changes of private airlines are mainly due to efficiency improvement. The changes associated with international joint venture cargo carrier are due to its significant improvement in both the efficiency and technical changes.     

Impact of operational performance on air carrier cost structure: Evidence from US airlines

The impact of operational performance on airline cost structure is empirically investigated using an aggregate, statistical cost estimation approach. Two distinct sets of operational performance metrics are developed and incorporated into the airline cost models as arguments. Results from estimating a variety of airline cost models reveal that both delay and schedule buffer are important cost drivers. We also find that flight activity outside schedule windows increases cost, whereas flight inactivity within schedule windows does not. Using the estimated cost models, we predict the cost savings to airlines of “perfect” operational performance, obtaining an estimate in the range of $7.1–13.5 billion for 2007.     

The effect of code-sharing alliances on airline profitability

Code sharing and global alliances both have been increasingly adopted by airlines worldwide in recent years. A growing number of airlines, therefore, are embedded in networks of multilateral “coopetitive” (i.e., cooperative, but competitive) relationships that influence their product offering, pricing strategies, operating efficiency, market power, and their overall successes. There has been considerable research analyzing the benefits for airlines from joining global alliances, including bilateral code-sharing partnerships. However, the joint effect of code-sharing and global alliances on airline performance has not been fully investigated. In this paper, we study how the use of code-sharing strategies and their structural embeddedness into global alliances may impact airline performance. Using a unique dataset compiled from Flight Global and Airline Business's Annual Airline Alliance Report, the paper empirically investigates the joint benefits of code-sharing partnerships and global alliances on airline profitability. The results based on a group of 81 airlines during the 2007–2012 period show that the profit margin of an airline is positively associated with the number of code-sharing partners it has. Furthermore, the profit margin gains from code-sharing are greater when an airline has a higher proportion of its code-sharing partners in the same global alliance; i.e., allied code-sharing partners. Finally, we find no significant evidence that the percent of comprehensive code sharing partnerships to total partnerships has an impact on profit margin.     

Evaluating airline efficiency: An application of Virtual Frontier Network SBM

In this paper, airline efficiency is divided into three stages: Operations Stage, Services Stage and Sales Stage. The new three-stage strategic operating framework of airline efficiency is a modification of existing models. A new model, Virtual Frontier Network SBM, is proposed to evaluate the efficiency of 22 international airlines from 2008 to 2012. The results demonstrate the following: 1. The new model can apply to a new benchmarking airline such as Scandinavian Airlines. 2. Although passenger traffic, cargo traffic and revenue decreased from 2008 to 2009, most airlines’ overall efficiency increased in the period.     

Evaluating energy efficiency for airlines: An application of VFB-DEA

In this paper, the energy efficiency of airlines has been studied with number of employees, capital stock and tons of aviation kerosene as the inputs and Revenue Ton Kilometers, Revenue Passenger Kilometers, total business income and CO₂ emissions decrease index as the outputs. A new model, Virtual Frontier Benevolent DEA Cross Efficiency model (VFB-DEA), is proposed to calculate the energy efficiencies of 11 airlines from 2008 to 2012. Spearman correlation coefficient is applied to validate the applicability of the new model. The results indicate that capital efficiency is an important factor in driving energy efficiency, and the American financial crisis had a significant influence on the change in energy efficiency during this period.     

The effects of corporate governance on airline performance: Production and marketing efficiency perspectives

This study explores the relationship between operating performance and corporate governance in 30 airline companies operating in the US. First, this study applies a two-stage Data Envelopment Analysis (DEA) to evaluate the production efficiency and marketing efficiency of the airlines. Our findings indicate that, in general, there is not as much dispersion in the relative productive efficiencies of the airlines as there is in their marketing efficiencies. The low-cost airlines, on average, are more efficient carriers than the full-service ones, but less efficient marketers. Secondly, truncated regression is used to explore whether the characteristics of corporate governance affect airline performance. The results demonstrate that corporate governance influences firm performance significantly. Finally, we address the managerial decision-making matrix and make suggestions to help airline managers improve performance.     

Including aviation in the European emissions trading scheme: Impacts on the industry,CO2 emissions and macroeconomic activity in the EU

In July 2008, motivated by the expected high growth of aviation and the related impacts on climate change, the European Parliament adopted a directive to include airlines in the European Emissions Trading Scheme. This paper discusses possible impacts of this inclusion on the aviation industry in terms of CO₂ emissions and the macroeconomic activity in the EU. The analysis uses the Energy–Environment–Economy Model for Europe, a dynamic simulation model to investigate impacts of the European Emissions Trading Scheme on air transport. The impacts on air transport output and the macroeconomic effects are estimated to be small. This was robust to varying the carbon price. However, air transport CO₂ emissions were expected to decrease by up to 7.4%, which is more than that estimated previously and stems mainly from the supply-side reaction of the industry.     

Strategic responses by European airlines to the Covid-19 pandemic: A soft landing or a turbulent ride?

The coronavirus (COVID-19) pandemic has dramatically affected the aviation industry. This paper investigates how 20 European airlines communicated their crisis messages during the pandemic by employing Situational Crisis Communication Theory (SCCT) to airline responses. This qualitative study consisting of a systematic review and content analysis, examined 7237 messages from social media channels and press releases posted between December 1, 2019, and May 25, 2020, when the crisis unfolded worldwide. The results indicate that the airlines primarily emphasized instructing and adjusting crisis communication strategies. Further, Twitter replaced Facebook as the primary communication channel. This study provides insights on how airlines can and should communicate crisis-related messages amidst a severe pandemic. The study concludes with the implications of these findings and recommendations for airline stakeholders moving forward.     

How to regulate aviation's full climate impact as intended by the EU council from 2020 onwards

The EU Council intends to regulate air transport's full climate impact (i. e., CO₂ and NO_x, H₂O, SO_x, aerosols, contrails and contrail cirrus). A likely approach is the inclusion of all climate relevant species from aviation in the European Emissions Trading Scheme. We provide a proposal for this practice and analyze the economic impacts. Modelling results indicate that the cost effects of the EU-ETS addressing CO₂ and non-CO₂ emissions will be much larger than under the current scheme. This is because under the new approach, all climate relevant species are regulated and not just CO₂. The cost effects also depend on the length and altitude of the flight. Both have consequences for the competitive environment of the airlines under the scheme. Especially the full service network carriers will have to bear a competitive disadvantage compared to airlines offering just short- and medium-haul services. Remarkably, some cost effects are in opposition to the corresponding results for an ETS for the regulation of CO₂ alone.     

Multi-period efficiency and productivity changes in US domestic airlines

This study tracked the static efficiency and dynamic productivity changes of 14 US airlines from 2006 to 2015. Moreover, we estimated the principal economic drivers of the environmental variables to increase the US domestic airlines' efficiency using the double bootstrap regression analysis. The major aspects of this study are as follows: First, network legacy carriers have the highest efficiency, whereas low-cost carriers are lowest. Nonetheless, network legacy carriers still have room to improve scale inefficiency. Second, the fluctuations in technical change, rather than in efficiency change, tended to have greater effect on the fluctuation of Malmquist productivity index for US domestic airlines. Third, M&A between US airlines have both positive and negative effects in terms of efficiency and economies of scale. Fourth, cost environmental factors have a negative effect on US airlines' efficiency, while revenue factor is a positive effect. The results of this study may help US airline industry practitioners to understand the US domestic airline environment from an operator's perspective.