An efficiency analysis of international airline alliances: an empirical study using data envelopment analysis

Abstract

Alliances are inevitable outcomes of globalization and global competition in important industries such as the airline industry. That is the reason why the analyses in this study are not limited with airline level evaluation but assessments for alliances are also performed. This study evaluates the relative efficiencies of international passenger airline alliances, namely Star Alliance, One World and Sky Team, at transforming their inputs into outputs. Via Data envelopment analysis (DEA), four main and two explanatory models are analyzed for the year 2014 with BCC and CCR approaches using different input-output variable combinations such as total passenger seat capacity, fuel cost and seat per aircraft as the input variables and load factor, ASK and RPK as the output variables. Super-efficiency calculations are also performed in order to compare the results found by standard efficiency assessments. Two models employing ASK and load factor as the output variables are utilized to perform the efficiency analysis for the year 2013, as well. It is determined which airlines are playing as benchmarking peers for which airlines. Airline industry is proved to show variable returns to scale characteristics. Star Alliance is found to have the members that can be taken reference most by other two alliances’ member airlines for efficiency improvements. The excess amounts of inputs are determined for each alliance and their member airlines. Alliances will be able to identify their strengths and improvement areas and achieve more healthy developments with the help of the implications derived from this study.