Comparative efficiency analysis of major international airlines using Data Envelopment Analysis: Exploring effects of alliance membership and other operational efficiency determinants

Abstract

The establishment of alliance groups during the end of 1990s has marked the beginning of an era that is characterized by increased consolidation among Full-Service Network Carriers (FSNCs). In the context of increased competition, membership in a global airline alliance group has served as the main avenue for FSNCs to maintain or increase market share and attain economic viability. Although previous literature has repeatedly stressed the enhancement of operational efficiency as a major incentive for airline alliance membership, existing research related to the assessment of comparative efficiency between allied and non-allied airlines and among alliance groups is fairly scarce. In the current paper, an integrated methodological framework employing Data Envelopment Analysis (DEA) with super-efficiency and intertemporal approach is implemented to assess the effect of alliance group membership on 30 major international airlines regarding period 2012-2016. Primary findings suggest that alliance group membership is not associated with superior airline efficiency. In addition, airlines with high freight traffic revenue share are found to be more efficient than airlines demonstrating lower freight traffic revenue share. Finally, a statistically significant superior efficiency of Asian and European air carriers over American air carriers is substantiated.