A longitudinal Perspective on Efficiency of Airlines in Europe and the U.S

Abstract

The aviation industries in Europe and the US have been well-established since a very early age and have attracted great attention from both industry practitioners and academics. To derive a different perspective on the efficiency levels of airlines operating in the two matured markets, we adopted dynamic data envelopment analysis (DEA). Using the data of the period 2014 – 2016 of 7 European airlines and 9 US airlines that are publicly traded, the study offers an overall picture of airlines' efficiency in the two regions. Notably, the resource flow between the consecutive periods is incorporated into the measure to yield a longitudinal perspective on airlines' efficiency. The study reveals the two major findings. First, most publicly traded airlines in Europe and the US are efficient, except for Hawaiian airline headquartered in the US. Second, Hawaiian airline's inefficiency is majorly contributed by the overuse of the number of employees, consumed fuel, and the deficit of revenue seat-miles in 2014 and 2015. To improve the efficiency level, Hawaiian airlines could consider increasing employee productivity, using more fuel-efficient aircraft, and implementing new marketing strategies to boost sales.