AIRLINE EFFICIENCY


ADVANCES IN AIRLINE
ECONOMICS
Series Editor: James H. Peoples
Recent Volumes:
Volume 1:

Competition Policy and Anti-Trust, Darin Lee

Volume 2:

The Economics of Airline Institutions, Operations and
Marketing, Darin Lee

Volume 3:

Pricing Behavior and Non-Price Characteristics in the Airline
Industry, James Peoples

Volume 4:

The Economics of International Airline Transport,
James Peoples


ADVANCES IN AIRLINE ECONOMICS VOLUME 5

AIRLINE EFFICIENCY

EDITED BY

JOHN D. BITZAN
North Dakota State University, Fargo, ND, USA

JAMES H. PEOPLES
University of Wisconsin-Milwaukee, Milwaukee, WI, USA

WESLEY W. WILSON
University of Oregon, Eugene, OR, USA

United Kingdom À North America À Japan
India À Malaysia À China


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ISBN: 978-1-78560-940-4
ISSN: 2212-1609 (Series)

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CONTENTS
LIST OF CONTRIBUTORS

vii

EDITORIAL BOARD MEMBERS

xi

CHAPTER 1 INTRODUCTION AND OVERVIEW
John D. Bitzan, James H. Peoples and Wesley W. Wilson
CHAPTER 2 AIRLINE PRODUCTIVITY AND
EFFICIENCY: CONCEPT, MEASUREMENT,
AND APPLICATIONS

Chunyan Yu
CHAPTER 3 BENCHMARKING US ALL-CARGO
CARRIERS: A PRODUCTIVITY AND COST
COMPETITIVENESS ANALYSIS
Matteo Balliauw, Hilde Meersman, Evy Onghena
and Eddy Van de Voorde
CHAPTER 4 GROUND AND NETWORK
EFFICIENCY DRIVERS IN AFRICAN AIRLINES:
A TWO-STAGE NETWORK DEA APPROACH
Carlos Pestana Barros and Peter Wanke

1

11

55

73

CHAPTER 5 MODELING AIRLINE EFFICIENCY À A
COMPARISON OF INTERNATIONAL AIRLINES
USING DATA ENVELOPMENT ANALYSIS
Stefan Sjo¨gren

103

CHAPTER 6 THE EFFECTS OF MERGERS ON
AIRLINE PERFORMANCE AND SOCIAL WELFARE
Jia Yan, Xiaowen Fu, Tae Hoon Oum and Kun Wang


131

v


vi

CONTENTS

CHAPTER 7 AIRLINE MERGERS IN THE UNITED
STATES SINCE 2005: WHAT IMPACT HAVE THEY
HAD ON AIRLINE EFFICIENCY?
Mark R. Greer

161

CHAPTER 8 AIR TRANSPORT AND HIGH SPEED
RAILWAY: HOW WOULD COLLABORATION AFFECT
SERVICE PERFORMANCE?
Mikio Takebayashi

197

CHAPTER 9 MANAGING FREIGHT OPERATIONS
CHAINS OF PASSENGER AIRLINES AT
INTERNATIONAL AIRPORTS
Rico Merkert and David Wayne Alexander

221


CHAPTER 10 MULTI-PRODUCT COST ANALYSIS
OF US AIRPORTS
Patrick McCarthy

243

CHAPTER 11 REGIONAL DEVELOPMENT AND
AIRPORT PRODUCTIVITY IN CHINA
Clement Kong Wing Chow, Michael Ka Yiu Fung
and Japhet Sebastian Law
CHAPTER 12 AIRLINE FUEL EFFICIENCY:
ASSESSMENT METHODOLOGIES AND
APPLICATIONS IN THE U.S. DOMESTIC
AIRLINE INDUSTRY
Bo Zou, Irene Kwan, Mark Hansen, Dan Rutherford
and Nabin Kafle
CHAPTER 13 THE CONVERGENCE OF LOW-COST
AND LEGACY AIRLINE OPERATIONS
Kevin E. Henrickson and Wesley W. Wilson

283

317

355


LIST OF CONTRIBUTORS
David Wayne
Alexander


Institute of Transport and Logistics
Studies, University of Sydney,
Sydney, Australia

Matteo Balliauw

Department of Transport and Regional
Economics, University of Antwerp,
Antwerp, Belgium

Carlos Pestana Barros

Instituto Superior de Economia e Gesta˜o,
ISEG University of Lisbon,
Lisbon, Portugal

John D. Bitzan

College of Business, North Dakota State
University, Fargo, ND, USA

Clement Kong
Wing Chow

Faculty of Business, Lingnan University,
Hong Kong, China

Xiaowen Fu


Institute of Transport and Logistics
Studies, University of Sydney,
Sydney, Australia

Michael Ka Yiu Fung

Department of DSME, Faculty of Business
Administration, Chinese University of
Hong Kong, Hong Kong, China

Mark R. Greer

Department of Economics, Dowling
College, Oakdale, NY, USA

Mark Hansen

Department of Civil and Environmental
Engineering, University of California at
Berkeley, Berkeley, CA, USA

Kevin E. Henrickson

Department of Economics, Gonzaga
University, Spokane, WA, USA

vii


viii


LIST OF CONTRIBUTORS

Nabin Kafle

Department of Civil and Materials
Engineering, University of Illinois at
Chicago, Chicago, IL, USA

Irene Kwan

International Council on Clean
Transportation, San Francisco, CA, USA

Japhet Sebastian Law

Aviation Policy Research Centre, Faculty
of Business Administration, Chinese
University of Hong Kong,
Hong Kong, China

Patrick McCarthy

School of Economics, Georgia Institute of
Technology, Atlanta, GA, USA; Center for
Economics, Finance, and Management
Studies, Hunan University Changsha,
China (Visiting)

Hilde Meersman


Department of Transport and Regional
Economics, University of Antwerp,
Antwerp, Belgium

Rico Merkert

Institute of Transport and Logistics
Studies, University of Sydney,
Sydney, Australia

Evy Onghena

Department of Transport and Regional
Economics, University of Antwerp,
Antwerp, Belgium

Tae Hoon Oum

Sauder School of Business, University of
British Columbia, Vancouver, BC, Canada

James H. Peoples

Department of Economics, and the Supply
Chain Management Institute, University of
Wisconsin-Milwaukee, Milwaukee,
WI USA

Dan Rutherford


International Council on Clean
Transportation, San Francisco, CA, USA

Stefan Sjo¨gren

School of Business, Economics and Law,
University of Gothenburg,
Gothenburg, Sweden


ix

List of Contributors

Mikio Takebayashi

Graduate School of Maritime Sciences,
Kobe University, Kobe, Japan

Eddy Van de Voorde

Department of Transport and Regional
Economics, University of Antwerp,
Antwerp, Belgium

Kun Wang

Sauder School of Business, University of
British Columbia, Vancouver, BC, Canada


Peter Wanke

COPPEAD Graduate School of Business,
Federal University of Rio de Janeiro,
Rio de Janeiro, Brazil

Wesley W. Wilson

Department of Economics, University of
Oregon, Eugene, OR, USA

Jia Yan

School of Economic Sciences, Washington
State University, Pullman, WA, USA

Chunyan Yu

College of Business, Embry-Riddle
Aeronautical University, Daytona Beach,
FL, USA

Bo Zou

Department of Civil and Materials
Engineering, University of Illinois at
Chicago, Chicago, IL, USA



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EDITORIAL BOARD MEMBERS
SERIES EDITOR
James H. Peoples
University of Wisconsin À Milwaukee, Milwaukee, WI, USA

ASSOCIATE EDITORS
John D. Bitzan
North Dakota State University,
Fargo, ND, USA

Xiaowen Fu
The University of Sydney,
Sydney, Australia

Kevin Cullinane
University of Gothenburg,
Go¨teborg, Sweden

BOARD OF EDITORS
Volodymyr Bilotkach
Newcastle University, Newcastle
upon Tyne, UK

Timothy J. Hazledine
University of Auckland, Auckland,
New Zealand


Jan K. Brueckner
University of California, Irvine,
Irvine, CA, USA

Marc Ivaldi
Universite´ Toulouse 1 Capitole,
Toulouse, France

Martin Dresner
University of Maryland, College
Park, MD, USA

Theodore E. Keeler
University of California, Berkeley,
Berkeley, CA, USA

David Gillen
University of British Columbia,
Vancouver, BC, Canada

B. Starr McMullen
Oregon State University, Corvallis,
OR, USA

xi


xii

EDITORIAL BOARD MEMBERS


Steven Morrison
Northeastern University, Boston,
MA, USA

Ian Savage
Northwestern University,
Evanston IL, USA

Claudio Piga
Keele University, Staffordshire,
UK

Wayne Talley
Old Dominion University,
Economics, Norfolk, VA, USA

Nicholas G. Rupp
East Carolina University,
Greenville, NC, USA

Wesley W. Wilson
University of Oregon, Eugene,
OR, USA


CHAPTER 1
INTRODUCTION AND OVERVIEW
John D. Bitzan, James H. Peoples and
Wesley W. Wilson

An efficient air transport system is critical to countries attaining and
sustaining healthy economies, especially given the increasingly interconnected world economy. Increasingly, companies are looking beyond their
domestic markets in selling their goods and services, and they are sourcing components from all over the globe in order to produce goods and
services at the lowest costs and in the highest quality. According to the
U.S. International Trade Administration, international trade accounts
for more than 60 percent of global GDP. In the United States, almost
305,000 companies export goods to more than 230 destinations, and
98 percent of the companies involved in exports are small- and mediumsized (Han & Soroka, 2014). Further, firms are increasingly obtaining
component parts from all over the globe. An example is the Apple
iPhone 6. According to CompareCamp.com, in creating the iPhone 6,
Apple uses suppliers from more than 30 different countries and assembles
the phones in China and Brazil (CompareCamp.com).
In order for companies to compete successfully in the global market,
efficient and reliable transportation is essential. This is especially true given
recent technological advances. As pointed out by Kraudel (2007), rapid
changes in technology have shortened product lifecycles. He observes that
shortened product lifecycles mean that firms have less time to profit from

Airline Efficiency
Advances in Airline Economics, Volume 5, 1À10
Copyright r 2016 by Emerald Group Publishing Limited
All rights of reproduction in any form reserved
ISSN: 2212-1609/doi:10.1108/S2212-160920160000005014

1


new innovations. Thus, there is a premium on responsiveness of supply
chains. In such an environment, firm competitiveness depends on the ability
to quickly ship products over long distances at reasonable rates, magnifying the importance of efficient air transportation.

Managing a global supply chain and selling to a global market also
requires the ability to move people around the globe quickly and efficiently,
as well. Societies prosper when people from different countries are able to
travel around the world using efficient transport. Not only does efficient
transport facilitate the management of global production supply chains,
but also fosters personal mobility and the exchange of ideas and technology. In fact, the personal mobility provided by efficient transportation
has created new opportunities for the globalization of the production of
services. An example is medical tourism, where patients travel to other
countries for medical care whether to save on costs or to receive improved
care (up to 750,000 U.S. residents per year, according to the CDC).
An excellent example of the benefits of efficient air transportation can be
seen in the global flower industry. Developing countries like Columbia,
Ecuador, and Kenya have become leaders in selling cut flowers due to the
ability to transport the perishable product quickly via air freight.
According to Rabobank, these countries are the 2nd, 3rd, and 4th largest
exporters of cut flowers after the Netherlands (Rijswick, 2015). The development of export markets for cut flowers has had positive impacts for these
developing countries; for example, in Kenya more than 500,000 people
depend on the flower industry for employment and sales were $507 million
in 2013 (Veselinovic, 2015).
Demand for cost-efficient air transportation service will continue to grow
as