Productivity efficiency analysis of the airlines in China after deregulation

Using data envelopment analysis and the Malmquist productivity index, this paper studies productivity efficiency of various airlines in China after the Chinese government deregulated the aviation industry in 2005. The results show that the productivity efficiency of non-state-owned airlines improves rapidly and eventually exceeds state-owned airlines after the deregulation policy. Among the state-owned airlines, the productivity of the local airlines and their technical changes are better than those of the central airlines.     

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.     

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.     

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.     

Efficiency and productivity changes in Greek airports during the crisis years 2010–2014

The aim of this study is to evaluate the operating efficiency and productivity changes of the Greek airports, during the first years of the severe economic crisis in Greece (2010–2014), by using two methods: Data Envelopment Analysis (DEA) and Malmquist Productivity index (MPI). Findings have shown that, despite the dramatic effects of the economic crisis on the socio-economic life of the country, overall airport efficiency and productivity improved, mainly due to exogenous factors such as international tourism growth. The MPI reveals that over the period of the study, airports have experienced an annual average increase in total factor productivity (TFP) of 0.9% (an increase of 3.6% over the examined period). On examining the components of this productivity change, it becomes evident that this is due to the combination of both positive (a slight progress) annual average technology change (0.5%) and technical efficiency change (0.4%). The results also indicate that 65.8% of airports have an increase in average TFP during the period 2010–2014, ranging between 0.4% and 20%. However, as Greek airports operate at poor levels of efficiency, there is still considerable space for improvements in most of the airports.     

Benchmarking the performance of Chinese airlines: An investigation of productivity,yield and cost competitiveness

In the past decade, the Chinese airline industry experienced extraordinary growth in size and profitability. However, no quantitative study has investigated the performance of Chinese airlines in terms of productivity and cost competitiveness. This study investigates the leading Chinese airlines' productivity, yield, cost competitiveness and input prices, and benchmarks them against major airlines around the world. It finds that Chinese airlines' productivity has improved significantly in the past decade but still lags behind that of industry leaders. Chinese carriers enjoyed high yields and low input prices in the domestic market, which led to high profitability in recent years. However, their cost advantage has been diminishing. To sustain long-term growth, Chinese airlines need to adopt the industry's best practices in a timely manner. Both the aviation markets and input markets in China should be further liberalized.     

Bankruptcy protection and stock market behavior in the US airline industry

This study examines the effects of bankruptcy protection on the stock market behavior of US airlines and their domestic rivals. We find that Chapter 11 airlines experience both statistically and economically significant adverse price changes at the time of filing for bankruptcy. During the close-to-3 years after filing, however, these airlines experience significantly positive price changes. Their rivals experience significantly positive price reactions both at the time of the filing and up to 3 years post-filing. The evidence is consistent with substantial improvement in the financial condition of the bankrupt airlines after the reorganization, and with rivals gaining from the failures of other airlines.     

Efficiency evaluation of Brazilian airlines operations considering the Covid-19 outbreak

In this paper we evaluate the operational efficiency of the Brazilian airlines considering the novel coronavirus Covid-19 outbreak. This novel coronavirus was first reported end of 2019 in Wuhan, China, however the powerful contamination spread among people forced the World Health Organization to characterize the Covid-19 as a pandemic in March of 2020. Here we analyze the main Brazilian airlines operations response due to lower demand because Covid-19 outbreak in first quarter of 2020 comparing with first quarter of 2019. The analysis here aims to verify the efficiency of airlines in domestic air transport market in Brazil through Multicriteria Data Envelopment Analysis (MCDEA) model. We used MCDEA to avoid limitations of classical DEA models for the case, especially the numbers of decision units and variable. In this paper we used an improvement of the MCDEA model to seek benchmarks considering a dual model all objective functions of MCDEA. The results highlight the challenges for the airlines, due to flight restriction and demand dropping. And also, the evaluation exposes the different company configuration of aircrafts age and network reconfiguration which was reflected by the efficiency difference on the period. The assessment shows the company with a better mix of aircraft models has a leverage on efficiency response due to unpredictable period as the pandemic Covid-19 outbreak.     

A productivity comparison of the world's major airlines

This paper measures and compares productivity and unit cost of the world's 23 major airlines using yearly panel data (1986–1993). An extensive effort was expended to put together a reliable database. These data are then used to accomplish the following: first, unit cost per unit of aggregate output is measured and compared. The effect of input price changes on the unit costs are also examined. Second, the ‘gross’ Total Factor Productivity (TFP) is measured and compared. In order to compare true productive efficiency across airlines and over time, a ‘residual’ TFP index is computed after removing effects of the variables beyond managerial control such as average stage length and composition of outputs. Log-linear TFP level, and TFP growth rate regressions are used to accomplish this task. Our results show that:

1. (a) during the sample period (1986–1993), the major European carriers and the carriers in newly industrialized countries in Asia have achieved significantly higher productivity growth than their North American counterparts;

2. (b) as a result, the productivity gap between North American and other carriers have diminished significantly;

3. (c) however, on average, the North American carriers still enjoy higher productive efficiency than the carriers in Asian NICs and European carriers, but the gap is closing very rapidly; and

4. (d) it is observed that, over time, the productive efficiency of carriers competing in the same markets tends to converge.

Finally, Asian NIC carriers clearly enjoy unit cost advantages over other major carriers. Our results show that European aviation liberalization which began in 1987 appears to have produced substantial productivity gains.     

Total factor productivity in Australian domestic aviation

This paper develops measures of total factor productivity for Australian domestic air transport over the past two decades, and enables comparisons to be made with the productivity of international airlines. In recent years there has been little by way of measurement of productivity performance of the Australian domestic airlines. A major reason for this has been the poor availability of data—data typically available for international airlines are no longer available for the Australian domestic airlines. Strictly speaking, it is no longer possible to measure total factor productivity for the domestic airlines, as critical data are missing. It is possible, however, to fill in the gaps with proxies, which enable useful, albeit imperfect, productivity measures to be developed. These can also be compared to published measures for international airlines. The results enable an assessment of the productivity performance of Australian domestic airlines over the past two decades (and especially over the post deregulation period). They also enable an assessment of the extent to which productivity has caught up with that achieved in well performing airlines overseas. The results also show light on whether there is scope for new airlines, such as the proposed entrant Virgin, to achieve lower costs than the incumbents.     

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.     

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.     

An analysis of profitability of the world’s major airlines

This paper analyses airline profitability through an examination of the changes in their productivity growth and the ability to markup prices above costs. A yearly panel data of 22 major airlines over the 1986–1995 period is used. Despite the fact that the European carriers were subjected to a more rapid rise in input prices and a faster decline in airfares than their North American counterparts, they achieved a faster growth in profitability since the early 1990s thanks to their higher productivity growth caused largely by the increased competition in Europe. Although overall profitability of the industry has improved during the 1990s, there are significant variations across airlines because of their differential capabilities to deal with the increasing competition and input prices.     

A combined MCDM model based on DEMATEL and ANP for the selection of airline service quality improvement criteria: A study based on the Taiwanese airline industry

The aim of this study is to select airline service quality improvement criteria for the Taiwanese airline industry. Numerous factors such as low railway prices, the development of high-speed rail, increases in petroleum prices, increases in foreign airline competition, and the recent economic depression have led many airlines in Taiwan to encounter financial difficulties and even closure. Researchers have begun to identify critical service quality improvement criteria with the goal of increasing the competitive advantages of airlines. Most of the selected criteria, however, suffer from a major technical problem: all of the measurement dimensions are independent, leading to inadequate criteria for measuring service quality. Our calculations consider the interrelationships and effects among the evaluation dimensions and criteria to precisely rank and select criteria. The value of this study is that it provides airlines with a direction for measuring and improving their service quality with the goal of developing sustained competitive advantage over the long term.     

Technical efficiency and productivity changes in Spanish airports: A parametric distance functions approach

This paper contributes to the airport benchmarking literature in two ways. To our knowledge, this is the first attempt at using a stochastic distance function to measure airports’ productivity changes while considering multiple outputs. Secondly, we calculate the evolution and decomposition of the Total Factor Productivity (TFP) for Spanish airports. The average rate of productivity showed a slight annual improvement of 0.9%, and the core engine of this was 3% increase in technical progress rather than through efficiency. Results, by airport, identify those needing improvement, to be more attractive in the Spanish airport restructuring program.     

The impact of environmental variables on the efficiency of Chinese and other non-Chinese airlines

This paper explores the impact of an international focus, the proportion of cargo traffic, and the level of salaries on the operational efficiency of Chinese airlines and other non-Chinese airlines. Data envelopment analysis (DEA) is employed to evaluate the operational efficiency and a bootstrapped truncated regression is applied to explore the impact of environmental variables on efficiency. The results show that an international focus has a negative impact, while the level of salaries has a positive impact. Also, we demonstrate that there is an inverted U-shaped relationship between efficiency and the proportion of cargo traffic.     

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.     

The evolving landscape of Chinese aviation policies and impact of a deregulating environment on Chinese carriers

This paper examines the recent developments of China’s aviation polices focusing on airline consolidation, the opening up of the domestic aviation market, and the adoption of more liberal international aviation policy. It then goes onto assess the impacts of the above policies on the industry structure, the performance of major airlines, and the competitiveness of Chinese airlines in international markets. The study shows that the industry became more competitive following the opening up of the domestic aviation market. Although major airlines saw an increase in passenger volume and an improvement in load factors, the falling yield and rising costs make them difficult to grow profitably. Moreover, Chinese airlines largely failed to capitalise on building an international network and the majors were weak in international competition. Strategic use of aviation policy to build a strong and profitable airline industry is still a formidable task lying ahead for policymakers.     

Airline cost changes: To what extent are they passed through to the passenger?

Since the start of the Millennium airline costs have been highly volatile, mainly due to large fluctuations in jet fuel prices. An important question for airlines and regulators is whether airlines are able to pass through cost changes to their prices. Little empirical evidence on the pass-through of costs exists. In this paper, we investigate which pass-through rates are most likely. According to economic theory, the pass-through of costs depends strongly on the type of cost increase (firm-specific or sector-wide) and market conditions (monopoly, oligopoly, perfect competition). In monopolistic markets, the shape of the demand curve also matters (linear, constant elasticity, log, power function). A pass-through rate of 100% is often assumed based on the reasoning that the aviation sector is highly competitive. We analyse market concentration in all airline markets in the world, and generally find a high level of concentration. Additionally, different airlines offer different products based on a variety of factors, including service, flight frequency, legroom, bags allowed on board, flight time and transfer time. Therefore, most aviation markets can be characterised as differentiated oligopolies. As airlines choose their quantities first (flight schedules) and adapt their prices to demand (yield management), we consider the Cournot model the best choice. In such markets, firmspecific cost changes will be passed through by a rate of less than half while sector-wide cost changes are passed through by a rate of more than half. In specific situations, the pass-through rate may be different. Examples are limited airport capacity (congestion), cross-subsidization, and the extent to which there is a level playing field.     

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.