The relationship between airline performance and corporate governance amongst US Listed companies

The paper explores links between the operating performance of 30 airlines in the US and corporate governance. Initially data envelopment analysis is used to assess the relative efficiency of airlines and to investigate the contribution of inputs and outputs that affect technical efficiency. Efficiency decomposition combined with cluster analysis and multidimensional scaling is used to explore competitive advantage of airlines. Finally, the question of whether or not corporate governance affects the airlines’ performance is examined.     

Organizational learning,operating costs and airline consolidation policy in the Chinese airline industry

This study investigated and reviewed organizational learning in the Chinese airline industry, which is dominated by state-owned or state-controlled airlines. This empirical research focused on the extensive scale of airline mergers and acquisitions among 12 Chinese airlines for the period of 1996–2014. This research aims to make a contribution towards addressing the general lack of academic reflection on the impact of organizational learning on airline performance during and after the completion of mergers and acquisitions. The empirical findings of this paper suggested that there was, in general, organizational learning experienced by Chinese airlines from their prior operating experience in improving operating costs. However, airline mergers in 2001/02 increased airlines' average operating costs, as most state-owned airlines are notorious for poor cost management. Significantly, the performance improvement among Chinese airlines was found during the post-merger periods in this study, and the increase in Chinese airlines’ operating costs during the post-acquisition periods due to the limited integration of 2010 acquisition compared with the 2001/02 mergers.     

Drivers of operational efficiency and its impact on market performance in the Indian Airline industry

India is considered to be one of the toughest aviation markets in the world, due to high fuel prices, overcapacity and intense price competition. It is therefore important to identify critical drivers of performance, which enable the airlines to survive and succeed in this emerging market with huge growth potential. In the current empirical study, we investigate the linkages between various performance drivers, operational efficiencies and market performance. An extensive data collection using primary and secondary sources enabled us to gather data on all the airlines operating in India, both private and public, for the period 2005–2012, on a variety of important parameters. We carried out a two-stage empirical analysis, which involved estimation of operational efficiencies during the first stage using Data Envelopment Analysis, and determination of performance drivers during the second stage using a two-way random effects GLS regression and also a Tobit model. Our findings suggest that while some of the structural and regulatory factors have an undesirable impact on airline performance, the low cost carriers in India have managed to achieve significant operational efficiencies. In addition, we find that, while cost efficiency is driven by a variety of factors, it is the technical efficiency which brings in better market performance through pricing power in the Indian airline industry.     

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.     

Performance evaluation for airlines including the consideration of financial ratios

Most previous studies concerning airline performance evaluation focus merely on operational performance. Financial performance, however, which might directly influence the survival of an airline is usually ignored. The absence of financial ratios will directly lead to biased assessment. This paper tries to construct a performance evaluation process for airlines with financial ratios taken into consideration. First, a conceptual framework is redeveloped, based on the one created by Fielding et al. to help form performance indicators involving both transportation and finance aspects. Second, to overcome the problems of small sample size and unknown distribution of samples, the grey relation analysis is used to select the representative indicators and the TOPSIS method is used for the outranking of airlines. Third, the organizational characteristics of an airline are used to divide the total performance into three major departments of an airline: production, marketing, and management. The division of total performance is helpful for operators to recognize the performance of a department of an airline and to identify the responsibility of a department. Finally, a case study is conducted using the example of Taiwan's five major airlines. The empirical result shows that performance evaluation for airlines can be more comprehensive, if financial ratios are considered.     

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.     

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.     

Exploring the green image of airlines: Passenger perceptions and airline choice

During the last few years there has been an increasing trend for companies to market their products or services as green or environmentally friendly as part of their corporate social responsibility. Few studies have analyzed the effects of this recent focus on the environment and its impact on airline passengers. Therefore, we examine passengers' general attitudes towards the green image of different airlines, perceived differences in eco-friendliness among these airlines, and effects on airline choice during booking. We also investigate how passengers' recent experiences with an airline affect perceived eco-friendliness of that airline. In addition we compare passenger ratings of airline eco-friendliness to those published by independent 3rd parties. Our findings show that the green image of airlines does influence airline choice during booking. We observed a passenger willingness to pay extra for a green image, however, not as much as their willingness to pay extra for amenities, such as additional legroom.     

Evaluating corporate social responsibility of airlines using entropy weight and grey relation analysis

This paper applies entropy weight and grey relation analysis to evaluate corporate social responsibility (CSR) performance of eight Chinese major airlines. This paper intends to achieve two main aims. First, this study uses entropy to find the relative weights of performance measures of CSR. In so doing, we find that on-time performance, accident rate, flight frequency, growth of employees revenue, and employees revenue are relatively most important measures. Second, based on the results of entropy analysis, this study ranks the airlines in terms of CSR performance by grey relation analysis. This result shows that most of the larger state-controlled airlines perform better in performance of CSR. Furthermore, the private airline has made relatively large improvement in its CSR performance. In addition, the listed airlines are better than non-listed airlines in CSR performance.     

Efficiency of US airlines: A strategic operating model

This paper applies the unoriented DEA network methodology to measure US airlines' performance relative to that of peer airlines and identifies the sources of its inefficiency. The analysis of the results suggests that major US airlines are more efficient than national US airlines in spending operating expenses and gaining operating revenue, but there is no significant difference in their service supply and demand efficiencies.     

A comparative performance analysis of airline strategic alliances using data envelopment analysis

As “open skies” agreements became more common among different countries and thus began to open up international routes to further competition, the global airline industry has undergone accelerated structural changes for the last two decades. These changes include the consolidation and expansion of airline strategic alliances throughout different regions of the world. Though airline strategic alliances are generally perceived to be a major driver for enhancing the operating efficiency and the subsequent competitiveness of participating member airlines, the concrete evidence supporting such a perception is still lacking in the literature. This paper is one of few attempts to evaluate the comparative efficiency of the strategic alliances among global airlines and then assess the managerial impact of airline alliances on the airline's comparative performances.     

Fuel hedging and airline operating costs

Fuel hedging is a common risk management tool used in the airline industry. But past studies have not addressed the question of whether fuel hedging creates any benefit to airline operations. This study is the first work that empirically examines the role of fuel hedging in reducing airlines’ operating costs. Using US airlines data from 2000 through 2012, we find that, after accounting for the presence of cost inefficiency, fuel-hedging airlines had about 9–12% lower operating costs, but this effect is statistically insignificant. Irrespective of the hedging status, US airlines could reduce operating costs by an average of 12–14% per year without reducing output.     

The effect of frequent flyer programs: A case study of the Korean airline industry

Frequent flyer programs are important for airlines in Korea in their marketing of services. This paper develops a conceptual model to investigate the effect of such programs by examining the relationships them and, airline service quality, pricing, passenger satisfaction, airline image, and airline selection. Path analysis is used to analyze data collected from Korean international air passengers. The results show that frequent flyer programs have direct and indirect effects on pricing, passenger satisfaction, airline image, and airline selection. In addition, their effects on passengers' selections are significantly different between Korean and foreign 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.     

Dynamic carbon emission performance of Chinese airlines: A global Malmquist index analysis

Monitoring the carbon emission performance of Chinese airlines helps inform targeted carbon-reduction policies. This paper proposes a global Malmquist carbon emission performance index (GMCPI), which can measure dynamic changes in total factor carbon emissions performance over time using a production frontier framework. The study then applied the proposed index to evaluate carbon emission performance of 12 Chinese airlines from 2007 to 2013; the study also proposed bootstrapping GMCPI to perform statistical inferences on the GMCPI results. The empirical study generated in three meaningful findings. First, the carbon emission performance of the airlines improved by 11.93%, mainly through technological progress. Second, there were carbon emission performance differences among three different airline types; there was also a convergence of carbon emission performance. Third, the most important factor influencing carbon emission performance was the air routes distribution. Chinese airlines should consider improving carbon emission performance further, by establishing an evaluation system, enhancing communication and coordination among different airlines, adjusting the scale of airline development, and optimizing the air routes distribution.     

Linkages between customer service, customer satisfaction and performance in the airline industry: Investigation of non-linearities and moderating effects

The paper investigates the linkages between customer service, customer satisfaction, and firm performance in the US airline industry. In particular, the moderating effects of market concentration and firm dominance on the service-satisfaction-performance relationship are examined. Our major finding is that market concentration dampens the relationship between customer satisfaction and airline profitability. Although the same moderating relationship was not found for market power, these results, combined, indicate that airlines can increase profits in concentrated markets without providing for the same, concomitant increases in customer satisfaction as airlines operating in more competitive markets. From a public policy perspective, our results point to the importance of regulators monitoring airline actions, such as mergers and alliances, that serve to increase the concentration of markets, but may result in lower levels of customer satisfaction.     

A note on the competitive advantage of large hub-and-spoke networks

This note explores the extent to which airlines operating large hub-and-spoke networks secure a competitive advantage. More specifically, this paper explores the intricate relationship which arises among productive efficiencies and profitability when the size of the hub-and-spoke network expands. To this end, Brueckner and Spiller (1991, International Journal of Industrial Organization 9, 323–342) airline economics model is generalized by allowing the size of the hub-and-spoke network to vary. The central result shows that, although the model exhibits decreasing returns to firm/network size (RTNS), nonetheless there is a competitive advantage to increasing the size of a network.     

Contract optimization with front-end fare discounts for airline corporate deals

This paper develops a non-linear programming model to design optimal corporate contracts for airlines stipulating front-end discounts for all nets, which are defined by combination of routes, cabin types, and fare classes. The airline’s profit is modeled using a multinomial logit function that captures the client’s choice behavior in a competitive market. Alternative formulations are employed to investigate the impact of price elasticity, demand, and competition on optimal discounting policies. A case study involving a major carrier is presented to demonstrate the model. The results indicate that airlines can increase revenues significantly by optimizing corporate contracts using the suggested model.     

Balanced scorecard based performance measurement of European airlines using a hybrid multicriteria decision making approach under the fuzzy environment

The purpose of this study is to evaluate the performance of the European airlines, using a balanced scorecard perspective. Within this scope, a hybrid multi-criteria approach was used by combining the Fuzzy DEMATEL, Fuzzy ANP, and MOORA methods. The results demonstrate that customer dimensions and profit per customer are the most significant key factors in the balanced scorecard perspective. Additionally, the airline companies with the largest profit (per employee) and highest number of passengers and flights (per employee) had the best scores in the multidimensional performance results. Furthermore, the airline companies with the highest profitability and efficiency are more successful than other companies. Therefore, we recommend European airlines to focus on these aspects in order to improve their performance. This study makes an important contribution to literature by helping to solve a significant problem in the market with the proposed methodology.     

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.