Airlines Performance via Two-Stage Network DEA Approach

Abstract

The performance of the airline industry has been widely studied using data envelopment analysis (DEA). Many existing DEA-based airline performance studies have used the standard DEA model, with some minor modifications. These studies have ignored the internal structure relative to the measures characterizing airline operations performance. In the current paper, airline performance is measured using a two-stage process. In the first stage, resources (fuel, salaries, and other factors) are used to maintain the fleet size and load factor. In the second stage, the fleet size and load factors generate revenue. The model used is called the centralized efficiency model where two stages are used to optimize performance simultaneously. The approach generates efficiency decomposition for the two individual stages. The use of this centralized DEA model enables obtaining insights not available from the standard DEA approach.