Route-based performance evaluation of Taiwanese domestic airlines using data envelopment analysis: A comment

This paper provides critical remarks and remedies to a recent article published in [Chiou, Y.-C., Chen, Y.-H., 2006. Route-based performance evaluation of Taiwanese domestic airlines using data envelopment analysis. Transportation Research Part E 42, (2) 116–127]. In their article, the authors adopted data envelopment analysis (DEA) to measure the route-based performance of Taiwanese domestic airlines. The present paper points out the faults or errors found in their article, in terms of variable selection, model selection, scale efficiency and scale economy, slack analysis, Tobit regression, and terminologies used. It is hoped to make more appropriate and much clearer the DEA applications to airline’s performance evaluation.     

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.     

Operational performance evaluation of international major airports: An application of data envelopment analysis

This paper uses data envelopment analysis to assess the operational performance of 20 major airports around the world. It is found that the form of ownership and the size of an airport are not apparently correlated with operational performance of airports. In contrast, the existence of a hub airport, the location of the airport, and the economic growth rate of the country in which the airport is located are all related to the operational performance of airports. The 20 airports are put into four groups according to their efficiency values.     

Evaluating the multi-period operating efficiency of international airports using data envelopment analysis and the Malmquist productivity index

For the most part, airports are publicly or semi-publicly owned and operated with fixed assets. As such, airports have been often considered little more than infrastructure providers for airlines. However, as airports have begun to offer a variety of ancillary services including passenger transfers, re-fueling, parking, and shopping, they no longer play second fiddle to airlines. To come into their own, a growing number of airports realized their need to develop competitive strategies that can attract more air traffic and generate greater revenue. Such strategies start with the assessment of their competitiveness in terms of operating efficiencies relative to others. To help airport authorities identify major drivers for enhancing the airport operational efficiency and the subsequent competitiveness, this paper evaluates the comparative efficiencies of international airports for a multi-year period (2006–2011) using data envelopment analysis intended for dynamic benchmarking and Malmquist productivity index built on time-series analysis. Our study indicates that the productivity of an airport was influenced by exogenous factors such as shifts in government policies and technological advances rather than endogenous factors driven by improvements in managerial practices.     

Technical efficiency of mainstream airlines and low-cost carriers: New evidence using bootstrap data envelopment analysis truncated regression

Between 2001 and 2005, the US airline industry faced financial turmoil while the European airline industry entered a period of substantive deregulation. Consequently, this opened up opportunities for low-cost carriers to become more competitive in the market. To assess airline performance and identify the sources of efficiency in the immediate aftermath of these events, we employ a bootstrap data envelopment analysis truncated regression approach. The results suggest that at the time the mainstream airlines needed to significantly reorganize and rescale their operations to remain competitive. In the second-stage analysis, the results indicate that private ownership, status as a low-cost carrier, and improvements in weight load contributed to better organizational efficiency.     

Performance evaluation of China's air routes based on network data envelopment analysis approach

Air routes are among the most important elements of civil aviation transport. Airlines' operations are mainly dependent on the structure and layout of air routes. This paper first divides the production process of air routes into two stages, allocation and transport, based on air route operational characteristics. Then, two network data envelopment analysis (DEA) models are proposed to analyze the efficiency of the system, allocation, passenger transport, and freight transport of 477 air routes. The research result demonstrates that the different constraints on intermediate measure in the network DEA models do affect the air routes’ efficiency significantly; Most air routes have high allocation efficiency and passenger transport efficiency, while they have low freight transport efficiency. Furthermore, the efficiencies of 82 airports are also analyzed after aggregating the efficiencies of the air routes.     

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.     

An integration of the multi-component DEA and GAR models to the measurement of hotel performance

The aim of this paper is to identify how well each hotel performs in each of its room and food and beverage divisions. To this end, this paper develops a multi-component data envelopment analysis/global assurance region (MDEA/GAR) model to fully gauge hotel performance where each hotel has its specific inputs and outputs for both divisions as well as shared inputs and common outputs between the two divisions. The application shows how the MDEA/GAR model can incorporate preferable hotels among the efficient ones with higher profit earning ratios when evaluating hotel performance. The results show that members of international chain-managed hotels perform significantly better than local chain-managed and independently managed hotels.     

Performance evaluation of Italian airports: A data envelopment analysis

This paper addresses empirically financial and operational performance of Italian airports using data envelopment analysis (DEA) methodology. With panel data for 2001–2003, the study tests variable relationships—the relative roles of dimension, managerial status and workload unit—to measure the proximity of the airports to the frontiers of best practices. The implications of the research for managerial purposes are then drawn to validate prior findings of the same relationships in other geographical contexts.     

Measurement of airlines’ capacity utilization and cost gap: Evidence from low-cost carriers

The aim of this paper is to evaluate the capacity utilization and cost gap between actual and global long-run minimum costs. Based on the data for thirteen low-cost carriers around the world for the year 2010, an input-oriented data envelopment analysis model is used to estimate the physical capacity utilization and cost gap between actual and global long-run minimum costs. The empirical results show that more than half of low-cost carriers should improve their capacity utilization, and all low-cost carriers should enhance their market efficiency and reduce their excess costs. Of the thirteen low-cost carriers, three should improve their technical efficiency, four should re-distribute the mix of variable inputs, all thirteen should pay lower prices for all variable inputs, and ten should enhance the utilization rate of their fixed factors.     

Measuring the performance of and tradeoffs within the triple bottom line

In this article, we use the data of Organization for Economic Cooperation and Development (OECD) trucking industry to illustrate a new analysis framework based on data envelopment analysis (DEA) using the concept of the triple bottom line to show the internal tradeoffs among economic, environmental and social issues within individual Decision Making Unit (DMU). We evaluate the various efficiencies of each national trucking industry by comparing it to its peers and develop indices that allow us to investigate the internal tradeoffs among the three areas of the triple bottom line. These measures help us understand how each country can choose to emphasize certain inputs and outputs to increase efficiency. The framework can be extended to other applications.     

Developing measures of airport productivity and performance: an application of data envelopment analysis

Many studies have investigated the financial results and economic productivity of airlines but few have investigated the productivity or performance of airports, and how changes in the industry may have affected them. Most airports measure performance strictly in accounting terms by looking at only total costs and revenues and the resulting surpluses or deficits. Few utilize any type of productivity measure or performance indicator. This paper applies Data Envelopment Analysis to assess the performance of airports. It is used to construct performance indices on the basis of the multiple outputs which airports produce and the multiple inputs which they utilize. In particular we develop productivity measures for terminals and airside operations. The performance measures are then used in a second stage Tobit regression in which environmental, structural and managerial variables are included. The regression results provide a ‘net’ performance index and also identify which variables the managers have some control over and what the relative importance of each variable is in affecting performance. The data set contains a panel of 21 U.S. airports over a five-year period.     

Dynamic DEA models with network structure: An application for Iranian airlines

Efficiency estimation of interdependent divisions within a company or assessing the interrelated processes in a production system provides insights for improving the operational performance. Recent developments in network data envelopment analysis (NDEA) models enable decision making units (DMUs) to be informed of inefficient processes within the system. The NDEA model assesses the processes of the system in a specific moment and ignores the dynamic effects within the production processes. Thus, without considering the temporal dimension of production processes, biased efficiency measurement will be obtained that provides misleading information to DMUs. For evaluating the performance of a DMU with interrelated processes during specified multiple periods, this paper proposes a relational dynamic NDEA (DNDEA) model which measures the efficiencies of the system and its internal processes over the time, simultaneously. To illustrate the capability of the proposed model, this study for the first time measures the efficiency of eight Iranian airlines in several periods connected to each other by carry over flows. The actual data is gathered in three periods from 2010 to 2012 and the results are compared with the dynamic DEA and network DEA models in the same time span.     

Dynamic panel data models in tourism

The analysis of relations of dependency is widespread in tourism research. However, there are a series of questions related to endogeneity, such as dependence on the past and reverse causality, closely linked to the specific characteristics of the sector, which cast doubt on the conventional methods that are currently in use, especially Ordinary Least Squares. In this paper, the consideration of those questions and their analysis is proposed with the current methodology of dynamic panel data with the System GMM method. In addition, an practical application is advanced with 187 airlines to demonstrate the use of the tool. The results of dynamic panel data analysis can contribute new nuances in the field of tourism that have hardly been reflected upon until now. Here it is used to examine the complex interrelations and the dynamic components of the sector in greater depth.     

Comparing efficiency of holding business model and individual management model of airports

This research compares the efficiency of holding business model to individual management model of airports, employing some robust non-parametric partial frontier-based methods to compare the statistical distributions of efficiency, under different scenarios, to find out which group of airports yields better global performance. The comparison between groups will follow a Malmquist index decomposition, which seems to be the most appropriate tool for within- and inter-group performance comparison. For this purpose, a sample of 145 airports from three continents is utilized. The results provide evidence that European airports are the most productive ones, and within this cluster, the individual management model presented a significant frontier shift with respect the holding cluster frontier, meaning that the former is much more productive than the latter.     

Profitability measurement of UK theme parks: an aggregate approach

Traditionally, financial ratios were used for profitability measurement. This research attempts to apply data envelopment analysis (DEA) to aggregate various financial ratios into a composite profitability index. The research sample includes 13 parks managed by 10 leading theme park operators in the UK. The result first reveals that multi‐site operators are significantly more profitable than their single‐site rivals. Furthermore, the consistency between DEA and ratio analysis indicates that DEA can be used as a good proxy of ratio analysis. It is hoped that this approach can provide new insights about financial measurement not available to managers through ratio analysis. Copyright © 2008 John Wiley & Sons, Ltd.     

An environment-adjusted dynamic efficiency analysis of international tourist hotels in Taiwan

The paper is the first study to combine four-stage approach and dynamic data envelopment analysis (DEA) to investigate the efficiencies of 45 international tourist hotels in Taiwan during 2002–2011. Using the four-stage approach of Fried et al. [1999. Incorporating the operating environment into a nonparametric measure of technical efficiency. Journal of Productivity Analysis, 12(3), 249–267] and the dynamic DEA model by Tone and Tsutsui [2010. Dynamic DEA: A slacks-based measure approach. Omega, 38(3), 145–156], the study considers the effects of the external operating environments and carry-over activities between two consecutive terms, and calculates managerial efficiency of international tourism hotels in Taiwan. The empirical results show that dynamic DEA provides more stable pure managerial efficiencies than traditional DEA, reflecting the continuity of the links between terms. Then the study employs Tobit regression to estimate the effects of location, management style, and occupancy rate on input slacks. The location in resort area leads to less slacks of employee and room. The chain system helps reduce slacks in room and area of meal department. The slack of employee and room gets lower while occupancy rate gets higher. After controlling the three external environment variables, the efficiency scores of 28 hotels increase, 9 hotels fall, and other 8 hotels still sustain on the efficient frontier.     

The geographical efficiency of Spain's regional airports: A quantitative analysis

Previous studies of the role of regional airports in the Spanish economy have focused on calculating efficiency using air traffic as the output and airport infrastructure data as the input. We present an alternative quantitative analysis based upon the geographical structure within the airport's market basin. We formulate a ‘geographical efficiency’ model that considers territorial variables within the airport hinterland. Input data for our model include the socio-economic structure of the population, intermodal transport links, industrial and tourism potential and existing leisure-related services. The output is the annual number of passengers associated with such constraints. The result is a relative efficiency estimate that shows uneven patterns of geographical efficiency amongst Spain's regional airports and also provides insights into opportunities for expanding some of these critical items of infrastructure. They suggest that some of Spain's regional airports may be better placed than others to compete in a liberalized market that exhibits a clear tendency in favor of coastal, tourism-based airports.     

The application of stochastic frontier panel models in economic regulation: Experience from the European rail sector

This paper shows how stochastic frontier panel techniques can be used by economic regulators to benchmark regulated firms against international best practice. We utilise a unique, panel dataset of European rail infrastructure managers (1996-2006). A time-varying inefficiency model, with firm-specific time paths for inefficiency, is adopted. The results were used in the 2008 regulatory review of the British infrastructure manager, Network Rail, and showed that the company faced an efficiency gap of around 40% against European best practice - in line with engineering-based evidence. More widely, the paper highlights the advantages of the inefficiency specification adopted for use in economic regulation.     

A comparative efficiency analysis of Spanish and Turkish airports

AENA in Spain and DHMI in Turkey operate a large majority of the airports in their respective countries. These two airport operators share some similar characteristics, but also present many differences with respect to their management strategies. For instance, the Turkish DHMI introduced a Build-Operate-Transfer (BOT) model and concession agreements, which enables active private participation in airport management. In contrast, management and operation responsibilities at all airports in Spain –with a few exceptions-have remained with AENA. This paper utilizes a data envelopment analysis (DEA) to compare the relative efficiency of airports within AENA and DHMI for the years between 2009 and 2011. Based on the efficiency scores, it further identifies the sources of inefficiencies resulting from various management strategies and other external factors. The results indicate higher average efficiency levels at Spanish airports, but private involvement enhances efficiency at Turkish airports. The majority of the airports in Spain and Turkey operate under increasing returns to scale. Certain policy options, including a higher private involvement and improvement of the airport network by closing some inefficient airports, should be considered in order to increase the airport efficiency in both countries.