Efficiency comparison of airline groups in Annex 1 and non-Annex 1 countries: A dynamic network DEA approach

This study compares the performance of the world's largest airline groups from Annex 1 and non-Annex 1 countries during the period 2010 to 2016. A recently proposed slacks-based network DEA model is further extended to a dynamic framework in order to measure airline groups' overall efficiency directly at the system, which is superior to the weighted sum of divisional efficiencies that is commonly used in the literature. A new definition of capital is also introduced taking into account the income-generating capacity of employed aircraft. The findings show that, although the aviation industry's emissions were not subject to the Kyoto Protocol, airline groups with hubs based in Annex 1 countries have performed better in terms of managing their overall production processes as well as operations and services efficiencies. Hence, one may argue that the Kyoto Protocol has wielded a positive influence on airline groups' decision-making process in general, and their operations and services in particular. On the other hand, sales efficiency results are not completely in line with this hypothesis as they show several Annex 1 airline groups are found to be highly inefficient among their rivals. •This study compares the performance of airline groups in Annex 1 and non-Annex 1 countries.•A new dynamic network DEA model is proposed to estimate overall efficiencies.•A new definition of capital is also suggested considering income-generating capacity of aircraft.•Airline groups from Annex 1 countries outperformed those in non-Annex countries.•The results could give evidence that confirms the Porter hypothesis.