Evaluation of Airline Efficiency and Environmental Impacts Using Data Envelopment Analysis

Airline efficiency has been a focus of research since the birth of the airline industry. Data envelopment analysis has become a highly accepted methodology for performing efficiency analysis and assessing relative differences between comparable business entities; over the last decade, airline efficiency research has proliferated into this linear programming domain. While early airline efficiency research focused primarily on revenue generation and profitability, growing commercial social responsibility is driving greater investment into understanding and improving the environmental impact of airline operations. This study is intended to partially fill a gap in exigent literature. While limited data envelopment analysis including environmental impacts has been conducted, the models treat environmental impacts as an output, never as an input or intermediate variable in the decision-making models.This study constructed a linear programming model utilizing the data envelopment analysis methodology to assess the relative efficiencies of thirteen airlines. The model consumes operational and financial performance indicators of the airlines, as well as abatement success measured as a function of the carbon dioxide emissions produced by the airline operations. The study analyzed airline activities from 2013 to 2015.The results of the study indicated that the linear programming model was successful in measuring airline operational efficiency, inclusive of: (a) different capacity and cost components of airline operations, (b) carbon dioxide emissions abatement, (c) differing airline business models associated with service levels, and (d) the implications of different routes and networks. Airline-specific recommendations are presented, based on analysis of their 2013-2015 operational performance reviewed in conjunction with airline strategy disclosures included in annual reports.The study provides theoretical and practical contributions to airline efficiency research. The study is the first to include environmental impact abatement expense as an input into airline decision-making for an overall airline efficiency model, as opposed to an output which is calculated as part of an optimization strategy focused on capacity or revenue generation.