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Efficiency in Latin American airlines: A two-stage approach combining Virtual Frontier Dynamic DEA and Simplex Regression

Peter Wanke and Carlos Barros

Journal of Air Transport Management, 2016, vol. 54, issue C, 93-103

Abstract: This paper presents an efficiency assessment of Latin American airlines, using VDRAM-DEA (Virtual Frontier Dynamic Range Adjusted Model - Data Envelopment Analysis). In VDRAM, the reference and DMU evaluation sets are different, thus allowing higher discrimination of scoring. In this research, the VDRAM model is used first in a two-stage approach. In the second stage, Simplex Regression is adopted to handle skewed and asymmetrical efficiency scores. The results corroborate previous studies and reveal that the impact of fleet mix and public ownership cannot be overlooked in Latin American airlines, which seem to be affected by insufficient load factors and hub and spoke systems. For the same reasons, although low cost carriers are an emerging trend in the region, it was not possible to confirm their higher efficiency levels. Besides, to some extent, these findings also show the absence of a learning curve in Latin American airlines.

Keywords: Airlines; Latin America; VDRAM; Two-stage; Simplex regression (search for similar items in EconPapers)
Date: 2016
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