Performance Evaluation of Indian Airline Industry: An Application of DEA

Abstract

The airlines in our country are experiencing low fares, poor load factors, drop in premium travels, decline in cargo loads and low yields due to deteriorating market conditions. To tide over the situation, companies need to have clear game plan and management strategies to effect turnaround of the airlines. This can be achieved only if companies know their performance gap with the benchmarked airline. Present work is aimed at calculating the relative performances of different Indian domestic airline industry (total 11 in India) using DEA framework. Data Envelopment Analysis is used to construct performance indices on the basis of the multiple outputs which airlines produce and the multiple inputs which they utilize. The result is used to find which variables the managers have some control over and what the relative importance of each variable is that affecting performance. Data Envelopment Analysis (DEA) provides a clear answer to the airline manager's problem.