Airline Sustainability Modeling: A New Framework with Application of Bayesian Structural Equation Modeling

Hashem Salarzadeh Jenatabadi, Peyman Babashamsi, Datis Khajeheian and Nader Seyyed Amiri
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Hashem Salarzadeh Jenatabadi: Department of Science and Technology Studies, University of Malaya, Kuala Lumpur 50603, Malaysia
Peyman Babashamsi: Department of Civil & Structural Engineering, Universiti Kebangsaan Malaysia, Kampung Bangi 43600, Malaysia
Datis Khajeheian: Department of Media Management, Faculty of Management, University of Tehran, Tehran141556311, Iran
Nader Seyyed Amiri: Department of Corporate Entrepreneurship, University of Tehran, Tehran1439813141, Iran

Sustainability, 2016, vol. 8, issue 11, 1-17

Abstract: There are many factors which could influence the sustainability of airlines. The main purpose of this study is to introduce a framework for a financial sustainability index and model it based on structural equation modeling (SEM) with maximum likelihood and Bayesian predictors. The introduced framework includes economic performance, operational performance, cost performance, and financial performance. Based on both Bayesian SEM (Bayesian-SEM) and Classical SEM (Classical-SEM), it was found that economic performance with both operational performance and cost performance are significantly related to the financial performance index. The four mathematical indices employed are root mean square error, coefficient of determination, mean absolute error, and mean absolute percentage error to compare the efficiency of Bayesian-SEM and Classical-SEM in predicting the airline financial performance. The outputs confirmed that the framework with Bayesian prediction delivered a good fit with the data, although the framework predicted with a Classical-SEM approach did not prepare a well-fitting model. The reasons for this discrepancy between Classical and Bayesian predictions, as well as the potential advantages and caveats with the application of Bayesian approach in airline sustainability studies, are debated.

Keywords: airline performance index; Bayesian structural equation modeling; cost function; Gibbs sampler; airline sustainability (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2016
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