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Technical Efficiency in International Air Transport

Michaelides, Panayotis G. and Belegri-Roboli, Athena and Marinos, Theocharis (2008): Technical Efficiency in International Air Transport.

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Abstract

The paper estimates technical efficiency in International Air Transport, within the framework of Stochastic Frontier Analysis. It is based on Panel Data for twenty four (24) companies worldwide, over the time period 1991-2002 and employs the Cobb-Douglas specification of the production function. A first finding of our investigation is that air transportation companies, worldwide, experienced (almost) constant returns to scale. A second interesting result is that technical efficiency of air transportation companies, worldwide, ranged between 37% and 100% with an average equal to about 89%. However, the industry’s performance worldwide in terms of technical efficiency does not follow a clear trend in time, whereas some differences in performance depending on the corporation’s continent of origin are observed. More precisely, the American, Australian and Asian have left behind the European companies. Also, the level of technology experienced a slight increase, while the privatization of very few air transportation companies in our data set does not seem to have any systematic impact on them in terms of technical efficiency. Finally, the results are compared with those yielded by the linear programming approach and the estimates are found to be very consistent with the results using Data Envelopment Analysis.

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