Technical efficiency of mainstream airlines and low-cost carriers: New evidence using bootstrap data envelopment analysis truncated regression

• Two-stage DEA is employed to assess technical and scale efficiency of airlines.
• Results show US and most major European airlines needing to scale-down operations.
• Environmental variables in general significantly impacts on technical efficiency.

Between 2001 and 2005, the US airline industry faced financial turmoil while the European airline industry entered a period of substantive deregulation. Consequently, this opened up opportunities for low-cost carriers to become more competitive in the market. To assess airline performance and identify the sources of efficiency in the immediate aftermath of these events, we employ a bootstrap data envelopment analysis truncated regression approach. The results suggest that at the time the mainstream airlines needed to significantly reorganize and rescale their operations to remain competitive. In the second-stage analysis, the results indicate that private ownership, status as a low-cost carrier, and improvements in weight load contributed to better organizational efficiency.