Productivity and efficiency modeling amongst ASEAN-5 airline industries

Abstract

This study intends to benchmark the technical efficiency and the productivity change measurement of the five national airlines in ASEAN-5 countries via Data Envelopment Analysis (DEA) and a DEA-based Malmquist Total Factor Productivity (TFP) Index approach. DEA approach uses a balanced panel data extracted from the annual report of Garuda Indonesia, Malaysia Airlines, Philippine Airlines, Singapore Airlines and Thai Airways International, covering the period of 2007 to 2013. The Tobit model is used to investigate the effect of input variables (Available Seat Kilometer (ASK) and Operating Cost) and output variables (Revenue Passenger Kilometer (RPK) and Passenger Revenue) on the efficiency scores computed by DEA. The efficiency scores of ASEAN-5 airlines computed by DEA shows that Malaysian Airlines is the least efficient airline and Philippines Airlines is the airline with the best efficiency. The result of Malmquist TFP approach reveals that there is a 1.2 percent improvement in technical efficiency, 1.2 percent deterioration in technology, 0.7 percent progression in pure technical efficiency, 0.5 percent increase in scale efficiency and a 0.1 percent decline in TFP in the airline industry in ASEAN-5 throughout the entire study period. The Malmquist TFP approach also reports that the change in TFP was mainly due to the deterioration of technology. The empirical results obtained from Tobit analysis suggest that the ASK has a significant negative impact on efficiency score, whereas both RPK and Passenger Revenue are found to have a significant positive effect on efficiency. Operating cost is the only variable that is found to have no significant impact on efficiency score. (C) 2018 The Authors. Published by IASE.