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Measurement of airlines’ capacity utilization and cost gap: Evidence from low-cost carriers

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  • Yu, Ming-Miin
  • Chang, Yu-Chun
  • Chen, Li-Hsueh

Abstract

The aim of this paper is to evaluate the capacity utilization and cost gap between actual and global long-run minimum costs. Based on the data for thirteen low-cost carriers around the world for the year 2010, an input-oriented data envelopment analysis model is used to estimate the physical capacity utilization and cost gap between actual and global long-run minimum costs. The empirical results show that more than half of low-cost carriers should improve their capacity utilization, and all low-cost carriers should enhance their market efficiency and reduce their excess costs. Of the thirteen low-cost carriers, three should improve their technical efficiency, four should re-distribute the mix of variable inputs, all thirteen should pay lower prices for all variable inputs, and ten should enhance the utilization rate of their fixed factors.

Suggested Citation

  • Yu, Ming-Miin & Chang, Yu-Chun & Chen, Li-Hsueh, 2016. "Measurement of airlines’ capacity utilization and cost gap: Evidence from low-cost carriers," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 186-198.
    • Handle: RePEc:eee:jaitra:v:53:y:2016:i:c:p:186-198
    DOI: 10.1016/j.jairtraman.2016.03.005
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    2. Ying Li & Tai‐Yu Lin & Yung‐ho Chiu & Shu‐Ning Lin & Tzu‐Han Chang, 2021. "Impact of alliances and delay rate on airline performance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(6), pages 1607-1618, September.
    3. Liu, Dan & Zhang, Jiahuang & Yu, Ming-Miin, 2023. "Decomposing airline profit inefficiency in NDEA through the non-competitive Nerlovian profit inefficiency model," Journal of Air Transport Management, Elsevier, vol. 107(C).
    4. Veysi Asker, 2024. "Financial Performance Analysis Using the Merec-Based Cobra Method: An Application to Traditional and Low-Cost Airlines," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 2, pages 35-52.
    5. Chen, Zhenling & Zhang, Xiaoling & Ni, Guohua, 2020. "Decomposing capacity utilization under carbon dioxide emissions reduction constraints in data envelopment analysis: An application to Chinese regions," Energy Policy, Elsevier, vol. 139(C).
    6. Pan, Jing Yu & Truong, Dothang, 2018. "Passengers’ intentions to use low-cost carriers: An extended theory of planned behavior model," Journal of Air Transport Management, Elsevier, vol. 69(C), pages 38-48.
    7. Yang, Guo-liang & Fukuyama, Hirofumi, 2018. "Measuring the Chinese regional production potential using a generalized capacity utilization indicator," Omega, Elsevier, vol. 76(C), pages 112-127.
    8. Ya Wang & Jiaofeng Pan & Ruimin Pei & Guoliang Yang & Bowen Yi, 2020. "A Framework for Assessing Green Capacity Utilization Considering CO 2 Emissions in China’s High-Tech Manufacturing Industry," Sustainability, MDPI, vol. 12(11), pages 1-25, May.
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    10. Viera Mendelová, 2021. "Decomposition of cost efficiency with adjustable prices: an application of data envelopment analysis," Operational Research, Springer, vol. 21(4), pages 2739-2770, December.
    11. Zhuo-wan Liu & Tomas Balezentis & Yao-yao Song & Guo-liang Yang, 2019. "Estimating Capacity Utilization of Chinese State Farms," Sustainability, MDPI, vol. 11(18), pages 1-29, September.
    12. Yang, Guo-liang & Fukuyama, Hirofumi & Song, Yao-yao, 2019. "Estimating capacity utilization of Chinese manufacturing industries," Socio-Economic Planning Sciences, Elsevier, vol. 67(C), pages 94-110.
    13. Wang, Miao & Feng, Chao, 2023. "Measuring capacity utilization under the constraints of energy consumption and CO2 emissions using meta-frontier DEA: A case of China's non-ferrous metal industries," Resources Policy, Elsevier, vol. 80(C).
    14. See, Kok Fong & Rashid, Azwan Abdul & Yu, Ming-Miin, 2024. "Measuring the network capacity utilization, energy consumption and environmental inefficiency of global airlines," Energy Economics, Elsevier, vol. 132(C).
    15. Tanrıverdi, Gökhan & Merkert, Rico & Karamaşa, Çağlar & Asker, Veysi, 2023. "Using multi-criteria performance measurement models to evaluate the financial, operational and environmental sustainability of airlines," Journal of Air Transport Management, Elsevier, vol. 112(C).
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    17. Karagiannis, Giannis, 2023. "Decomposition and aggregation of tone efficiencies," Omega, Elsevier, vol. 119(C).

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