Exploring comparative efficiency and determinants of efficiency for major world airlines

Using a Bayesian meta-frontier approach to evaluate airline performance: The nexus between airline efficiency and customer satisfaction

A balanced panel of 83 airlines during 2011-2019, classified into (a) high perceived service quality and (b) low perceived service quality, was incorporated into the Bayesian meta-frontier framework. Our findings were obtained from applying a novel method to data sourced from the ICAO Data+ and Skytrax databases. We obtained consistent efficiency and meta-technology efficiency estimates, shedding light on airlines' business models, products, and services to improve their efficiency and customer satisfaction. Specifically, we did not identify a trade-off between customer satisfaction and airline efficiency. However, larger firms were more likely to achieve this dual objective. Airlines classified as having high service quality reported greater allocative inefficiency than their low-quality service counterparts. During periods with or without minor external shocks (e.g., 2011-2019), airlines could offer premium products at reasonable prices or with a better quality and cost-of-service balance (e.g., premium economy cabins, extra legroom, inflight entertainment, and Internet).

Strategic fit of mergers and acquisitions in Latin American airlines: a two-stage DEA approach

Purpose

The purpose of this paper is to assess the efficiency determinants of mergers and acquisitions (M&A) in the context of Latin American airlines based on business-related variables commonly found in the literature. The idea is to identify preferable potential airline matches in light of fleet mix, ownership structure and geographical proximity.

Design/methodology/approach

In order to achieve the objective, all possible combinations of M&A pairs are considered in the analysis, which is developed in a two-stage approach. First, the M&A Data Envelopment Analysis model efficiency and returns-to-scale estimates are computed. Then, robust regression and multinomial logistic regression are respectively used to discriminate these estimates in terms of such business-related variables.

Findings

The results reveal that these different contextual variables significantly impact virtual efficiency and returns-to-scale levels. Private ownership, passenger focus and a better match between aircraft size and demand for flights appear to be key drivers for merged airline efficiency.

Research limitations/implications

The study makes theoretical contributions, though limited to analyzing Latin American airlines only. The use of bootstrapped robust/multinominal logistic regression, compared to the methods adopted by previous literature studies, generates more accurate and robust results related to the efficiency drivers due to its special feature and ability to allow the discrimination of increasing, decreasing, and constant returns to scale in light of a given set of contextual variables.

Practical implications

This study examines the pure effect of the merging activity on efficiency gains. Not only private ownership but also a hybrid public–private ownership has a positive influence on virtual efficiency, suggesting an important governmental role in promoting M&A in the airline industry.

Originality/value

The authors present an original take on the issue of airline mergers by exploring what are the major drivers possibly involved in efficiency gains of potentially merged (virtual) airlines. The authors identify preferable potential airline matches where efficiency gains would be positive in light of business-related variables such as fleet mix, ownership structure and geographical proximity. The analysis also includes an assessment of the impact of contextual variables such as cargo type, ownership structure and geographical proximity in relation to the strategic fit of mergers considering the resulting efficiency and returns-to-scale scores of virtually merged airlines. To the authors’ knowledge, no previous research has addressed these issues in Latin American airlines. Further research directions for this industry are also discussed.

Developing a structured framework for measuring police efficiency

Purpose

The growing emphasis on “managerialism” in police and the pressure to employ scientific methods of performance measurement warrants the need for a structured framework. The scope of police duties is large as it relates to several preventive and corrective action related to public safety and crime management. A challenge in measuring police performance is to take into consideration a range of variables that can potentially influence performance. The purpose of this paper is to provide a structured framework for measuring different facets of police efficiency, which is especially useful in managerial decision making.

Design/methodology/approach

This paper uses data envelopment analysis and discusses efficiency measurement in terms of the technical, managerial and scale efficiency, resources utilization patterns, returns-to-scale analysis and measurement of super-efficiency. The application of framework is based on the data of the police stations of Lahore, a large metropolitan city in Pakistan.

Findings

The paper shows the application of different measures of efficiency in making decisions pertaining resources allocation, prioritizing areas for improvement and identifying benchmarks for performance improvement. Different measures of efficiency are presented in the form of a structured framework.

Practical implications

Managers can use this framework to glean rich insights into different types of efficiency and sources of inefficiency. Further, a discussion of variables provided in this paper can be especially useful in determining trade-offs during the selection of inputs and outputs.

Originality/value

The key contribution of this paper is in providing a multifaceted efficiency measurement framework, that is capable of providing rich insights into the sources of inefficiency and helps scientific decision making. To the best of our knowledge, such a multifaceted approach has not been provided in previous publications.

Benchmarking the international compulsory education performance of 65 countries and economies

Purpose

The Program for International Student Assessment (PISA) measured 15-year-olds’ performance in mathematics, reading, and science. The purpose of this paper is to use the assessment results of PISA 2006, 2009, and 2012 to benchmark the compulsory education performance of 65 countries and economies with emphasis on two benchmarking steps: identifying benchmarks and determining performance gaps.

Design/methodology/approach

The authors use a multi-criterion and multi-period performance categorization method to identify a group of best performers as benchmarks. Then, the authors use two-sample t-tests to detect against benchmarks whether each country or economy has significant performance gaps on individual performance measures.

Findings

Based on the mean scores of three assessment subjects in PISA 2006, 2009, and 2012, six best performers (Top-6) are identified from 65 participating countries and economies. In comparison with Top-6’s weighted averages, performance gaps are found for most countries and economies on the mean score of each subject, the percentage of top-performing students in all three subjects, and the percentage of lowest-performing students in each subject.

Originality/value

For compulsory education systems around the world, this paper provides an original categorization of performance based on the results of three PISA cycles, and provides new insights for countries and economies to prioritize improvement efforts to increase average performance, pursue excellence, and tackle low performance. For benchmarking applications involving multi-criterion and multi-period data, this paper presents a novel method of using statistical control charts to identify benchmarks and then using two-sample t-tests to determine performance gaps on individual performance measures.

Multi-criterion and multi-period performance benchmarking of products and services

Purpose

A product or service usually has multiple measurable characteristics, and its performance on different measures may vary and may change over time. Multi-criterion and multi-period performance benchmarking presents a challenge for management to determine performance gaps among comparable products or services. The purpose of this paper is to propose a new performance benchmarking method to address this challenge.

Design/methodology/approach

The author develop this method by formulating two benchmarking functions: a differentiation function based on Shewhart average and standard deviation charts to distinguish the performance of products or services on a single measure, and a categorization function to classify each product’s or service’s overall performance across all measures. By systematically removing the lowest-performing products or services from comparison, the author use these functions iteratively to detect performance gaps.

Findings

Using this method, the author find performance gaps in each of three benchmarking applications of airports, hotels, and minivans, although a number of performance gaps are not obvious from the raw data.

Research limitations/implications

This benchmarking study focuses on the quantifiable outcome performance of products and services.

Practical implications

This benchmarking method is generic and applicable to most products and services. It is robust not only for discovering performance gaps, but also for providing useful insights for managers to prioritize improvement efforts on individual performance measures.

Originality/value

The novelty of this benchmarking method lies in that it can not only find the “best overall” products or services for all performance measures, but can also pinpoint the “best-in-class” products or services as well as performance gaps for each performance measure. In addition, this paper presents several original ideas for performance benchmarking, including: using the control limits of Shewhart control charts to categorize performance gaps, systematically removing the lowest-performing products or services from comparison for the purpose of detecting hidden performance gaps, and using symbolic expressions to integrate benchmarking results from all measures and to show all performance gaps intuitively.

Evaluating managerial efficiency of petrochemical firms in Saudi Arabia

Purpose

The purpose of this paper is to examine managerial efficiency of the whole population of petrochemical firms in the Kingdom of Saudi Arabia (KSA). It also identifies the root causes of inefficiencies and proposes measures to overcome these.

Design/methodology/approach

The paper uses the data envelopment analysis approach to measure the managerial efficiency in context of various returns-to-scales. To glean further insights into the sources of inefficiency, the study investigates the extent of utilization of resources by comparing target inputs vis-à-vis the actual inputs used. This provides the authors information about the degree of underutilization of resources as well as an insight into the sources of inefficiency, e.g., those stemming from the managerial or scale of operations.

Findings

The findings reveal a great amount of inefficiencies in Saudi petrochemical sector. These inefficiencies arise from both the underutilization of resources as well as the inability of petrochemical firms to run their operations at optimal scales.

Practical implications

The findings of the study allude toward measures that managers might adopt to overcome the issues of inefficiency. They ought to ensure better utilization of resources by running operations of the firms at optimal scales of production. The firms operating under the sub-optimum scales of operations need to revisit their marketing and production strategies. These might take up the form of boosting marketing efforts to win more orders from customers and increasing production volumes that could allow these firms to take advantage of economies of scale.

Originality/value

This paper is a first attempt to measure efficiency of petrochemical sector in KSA which stands as the key contributor to the national exchequer. Since the study consists of the whole population of petrochemical firms in KSA, it measures the “true” managerial efficiency of petrochemical firms in the sector. Further, being a pioneer study on managerial efficiency of petrochemical sector, it extends original contribution to the literature on efficiency of firms, combined with rich insights into sources of inefficiencies.