Airline efficiency measures using a Dynamic Epsilon-Based Measure model

In this paper, we focus on measuring airline dynamic efficiency. Number of Employees and Aviation Kerosene are chosen as the inputs. Revenue Tonne Kilometers, Revenue Passenger Kilometers and Total Revenue are the outputs. Capital Stock is selected as the dynamic factor. A new model, Dynamic Epsilon-Based Measure (DEBM) model, is proposed to evaluate the dynamic efficiencies of 19 airlines from 2009 to 2014. The main findings are: 1. Scandinavian, Emirates and Cathay Pacific are the benchmarking airlines among the 19 airlines. 2. The highest efficiency change index happens in 2010, which has close relationships with the financial crisis of 2008. 3. The output-oriented DEBM and non-oriented DEBM do well in reflecting the efficiency differences, while the input-oriented DEBM and output-oriented DEBM have good performance in mirroring yearly efficiency change.