Measuring the environmental efficiency of the global aviation fleet

•A single frontier, directional economic-environmental distance function is developed.•Environmental issues are underestimated when purchasing fleet to serve a specific airport.•Current fleets are not efficient in terms of fuel consumption, noise or emissions.•IPCC prices are 10× too low to induce airlines to consider negative externalities.•A federal fund subsidized by environmental charges needs to support fleet renewal.

This research analyses the environmental footprint of the airline industry in an attempt to highlight potential paths for improvement. We develop a directional economic-environmental distance function (DEED) which accounts for the production of both desirable and undesirable output and the potential for constrained increases in input utilization. This research applies the modeling framework to analyze the potential to reduce noise and airborne pollutants emitted by aircraft–engine combinations given the current state of aeronautical technology. The global aircraft–engine market is viewed from the regulatory perspective in order to compare the single environmental and operational efficient frontier to that of the airline carriers, and environmental objectives. The results of DEED are then applied in order to substitute the fleets serving Schipol, Amsterdam and Arlanda, Stockholm airports in June 2010 with the benchmark aircraft. The results highlight the inefficiencies of the current airline fleets and that the IPCC values of externalities are a magnitude of TEN too low to encourage changes in the global fleet hence the need for government intervention.