A multiobjective approach to fleet, fuel and operating cost efficiency of European airlines

In this paper, a multiobjective DEA approach to airlines target setting has been proposed allowing for more control and flexibility in the determination of the trade-offs among environmental impact, fleet cost and operating cost. These variables are considered as inputs. Revenue Tonne-Kilometres (RTK) is the single output considered. For each airline, the proposed multiobjective Linear Programming model is solved using ADBASE, which finds all extreme efficient points in the Pareto Frontier. The representation of the Pareto Frontier as a function of RTK gives cues about the growth of the inputs and about their trade-offs with increasing output. Also, the technical efficiency of each airline has been assessed using a Slacks-Based Measure (SBM) of efficiency. The results show that about half of the airlines are technically inefficient and that most of the airlines operate below their Most Productive Scale Size which suggests that more industry consolidation is foreseeable in the future. Overall, although operating costs seem to be under control, there is an 8% overcapacity in terms of assets and a 7.2% excess carbon emissions. There is also room for an additional 4.4% overall traffic increase.

► Trade-offs among fuel cost, fleet cost and operating cost are computed.
► About half of the airlines studied are technically inefficient.
► Many airlines are not scale efficient, more industry consolidation is foreseeable.
► Operating costs seem to be under control.
► More overcapacity and excess carbon emissions than potential for traffic growth.