Industrial Management & Data Systems

A balanced scorecard envelopment approach to assess airlines' performance

Wann-Yih Wu Ying-Kai Liao
Article information:
To cite this document:
Wann-Yih Wu Ying-Kai Liao , (2014),"A balanced scorecard envelopment approach to assess airlines'
performance", Industrial Management & Data Systems, Vol. 114 Iss 1 pp. 123 - 143
Permanent link to this document:
http://dx.doi.org/10.1108/IMDS-03-2013-0135
Downloaded on: 27 June 2016, At: 17:13 (PT)
References: this document contains references to 58 other documents.
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

To copy this document: permissions@emeraldinsight.com

The fulltext of this document has been downloaded 1812 times since 2014*
Users who downloaded this article also downloaded:
(2014),"Exploring comparative efficiency and determinants of efficiency for major world airlines",
Benchmarking: An International Journal, Vol. 21 Iss 4 pp. 675-687 http://dx.doi.org/10.1108/
BIJ-09-2012-0054
(2014),"Empirical verification of the balanced scorecard", Industrial Management & Data Systems, Vol.
114 Iss 2 pp. 203-219 http://dx.doi.org/10.1108/IMDS-04-2013-0195
(2014),"What do we really mean by Balanced Scorecard?", International Journal of Productivity and
Performance Management, Vol. 63 Iss 2 pp. 148-169 http://dx.doi.org/10.1108/IJPPM-11-2012-0127

Access to this document was granted through an Emerald subscription provided by emerald-srm:534301 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for
Authors service information about how to choose which publication to write for and submission guidelines
are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as
providing an extensive range of online products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee
on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive
preservation.

*Related content and download information correct at time of download.

 The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-5577.htm

A BSC
A balanced scorecard envelopment
envelopment approach to assess approach
airlines performance
123
Wann-Yih Wu
Business Administration, National Cheng Kung University, Tainan, Received 22 March 2013
Taiwan and Revised 29 June 2013
Chinese Culture University, Taipei, Taiwan, and 10 July 2013
Accepted 12 July 2013
Ying-Kai Liao
Business Administration, National Cheng Kung University, Tainan, Taiwan
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

Abstract
Purpose This study purposed an integrated DEA-BSC model to evaluate the operational efficiency of
airlines. To adapt this model, 38 major airlines in the world were selected to assess their relative performance.
Design/methodology/approach An empirical study is employed using a cross-sectional research
design. The operational and financial data of 38 leading airlines companies were collected from annual
reports and business reports. Specifically, this study integrated the concepts of balanced scorecard
(BSC) and data envelopment analysis (DEA) and incorporated seven leading variables and four
lagging variables from BSC to implement DEA.
Findings By using the leading and lagging variables to implement DEA, this study not only
assessed the efficiency frontiers, input slack, output slacks, and benchmarking learning partners of
38 airlines, but also illustrated how leading indicators are related and influence lagging indicators.
In particular, the study results indicated that airlines with excellent performance in the efficient
frontiers tended to perform better in energy, capital, and other operating costs.
Research limitations/implications This study presented a DEA-BSC model to integrate the
concepts of BSC into DEA. The empirical results showed that the model is more advanced than the
capabilities of individual DEA and BSC. This model could also eliminate the faults of each one. Due to
the cross-sectional research design of this research, future research should develop the longitudinal
study to identify the time series of the influences of leading factors on lagging factors.
Practical implications This study offered an integrated model that incorporated the concepts of
BSC and DEA. The leading and lagging factors of BSC were adopted to the evaluation of operational
performance of airlines along with DEA. Therefore, BSC has served as the compliment of DEA. Using
the DEA-BSC results, such as the efficiency frontiers, the amount of slacks, and benchmark learning
partners, business executives could develop their improvement strategies.
Originality/value Since none of previous studies have integrated BSC and DEA to assess the
operational efficiency of the airline industry, the results of this study could serve as a baseline for
further academic validations, the results could also be very useful for the executives of airline
companies to allocate their resources for further improvement.
Keywords Balanced scorecard, Data envelopment analysis, Airline performance, Bench marking
Paper type Research paper
Industrial Management & Data
Systems
The authors would like to thank Orawan Wannadee for providing valuable assistance on an Vol. 114 No. 1, 2014
earlier version of this manuscript. Further, the authors would like to greatfully thank the editor pp. 123-143
q Emerald Group Publishing Limited
and two anonymous reviewers for providing constructive remarks and useful suggestions, 0263-5577
which have been instrumental in the development of his paper. DOI 10.1108/IMDS-03-2013-0135
 IMDS 1. Introduction
114,1 As global air transport industry becomes increasingly competitive, most operating
airlines feel pressured and have to respond quickly in order to survive in the industry.
Historically, low input prices have been more important than productive efficiency in
determining cost competitiveness. Asia-Pacific carriers tend to be more competitive in
lower factor costs, even though they are, in general, less efficient than US and
124 European carriers (Oum and Yu, 1998). Unfortunately, the circumstance has changed
as airlines have increased their global sourcing and input prices in developing
countries have continued rising over time. Because input prices are beyond the control
of airlines, the only way to lead in this industry is to improve airlines efficiency
(Bjelicic, 2012).
Over the last few decades, the issue of performance evaluation has created a
significant attention. The economy indicators that researchers usually considered in
evaluating the overall performance of airlines could be obtained from either operational
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

measures or financial measures (Merkert and Morrell, 2012; Tsai et al., 2012; Hung and
Chen, 2013). Traditionally, most organizations only looked at their financial
performance. Schefczyk (1993) explained the difficulty in using financial information
of international airlines since different accounting and taxation rules in various
countries may result in different impacts of leased assets on profit and balance-sheet
information. Scheraga (2004) investigated the structural drivers of operational
efficiency as well as the financial posture of airlines after the attacks of September 11,
2001. They found that relative operational efficiency did not inherently imply superior
financial mobility. Therefore, further validations on this issue are essential.
Among others, data envelopment analysis (DEA) and the balanced scorecard (BSC)
are two of the most important methods for performance evaluation, DEA (Charnes et al.,
1978) is a non-parametric technique based on the observed input-output data (or
decision making units (DMUs)) to identify the best practice units (efficiency frontiers)
and the inefficient units. While DEA has widely been adopted to evaluate the relative
efficiency among airlines, it still suffered from lacking of future view in which the
longitudinal variables (e.g. the records of continuous improvement) could not be
included in a single stage DEA study (Aryanezhad et al., 2011). Kaplan and Norton
(2007), as the founders of BSC, argued that firms should emphasize not only the
lagging factors (e.g. financial performance), but also the leading factors (e.g. customer
orientation, internal process improvement, and learning and growth). Without paying
attention to the leading factors, the lagging factors are doomed to be failed. Although
BSC has received wide acceptance from academics and practitioners, it was criticized
as having no formal implementation methodology, which may result in lack of
accountability (Fletcher and Smith, 2004). As a result, Aryanezhad et al. (2011), in a
case study of banking sector, proposed to integrated the concept of BSC and DEA by
adopting the indices of BSC into the input-output of DEA to increase the explanation
power of the model.
This study aims to measure the operational performance of the airline industry by
developing a DEA-BSC model. DEA has been applied in the evaluation of airline
performance (Sengupta, 1999; Barbot et al., 2008; Barros and Peypoch, 2009), most of
them follow the traditional input-output model which neglect the intermediate
measures or linking activities (Tone and Tsutsui, 2010, Lu et al., 2012). DEA is good at
estimating relative efficiency but poor at absolute efficiency. Specifically, previous
 studies never integrated the leading and lagging factors of BSC into the input-output A BSC
data of DEA in the airlines industry. Previous studies also never investigate the envelopment
interrelationship among the indices of the four dimensions of BSC for the airline
industry. The four dimensions of BSC will be used as the input or output factors of approach
DEA to ensure the comprehensiveness of the input-output data. Specifically the
important contributions of this study include:
(1) developing an integrated DEA-BSC model to measure the operating efficiency 125
of the airline industry;
(2) incorporating the lagging and leading factors of BSC for the input/output
variables of DEA;
(3) implementing truncated canonical correlation analysis to verify the
interrelationship among four factors of BSC; and
(4) integrating output efficiency to address managerial implications to decision
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

making to set up improvement strategies.

The remainder of this study is organized as follows: Section 2 discusses the literature
review of the related construct; Section 3 describes research design, Section 4 presents
empirical data and analyzes the study results; and Section 5 presents the conclusions.

2. Literature review
2.1 Characteristics of the airlines industry
The airline industry is part of the overall transportation system. While it shares many
things in common with other modes of transportation, it has its own specialties. First of
all, the demand for air travel can be divided into business travel and recreational travel.
Price elasticity for business travel tends to be very low, but for recreational travel, it is
generally very high (Holloway, 2008; Belobaba et al., 2009; Assaf, 2009; Badra, 2009). In
addition, modern aircraft service is very similar. The speed, comfort, and safety
aspects of a journey are likely to be a little different although airlines have
concentrated their promotional activities in order to differentiate their product
(OConnor, 2001). The advancement of technology and sophisticated equipment has
made the industry getting more and more capitally intensive (Budd, 2012; Chen and
Chen, 2012; Liou, 2012). Finally, the airline industry is particularly sensitive to business
cycles. With very high fixed costs and operating leverage, this industry could find it
very difficult to survive, especially when demand drops. The use of capital-intensive
structure and the practice of using fares and service schedules to gain a competitive
edge seem to favor big firms, which eventually form an oligopolistic type of industry
structure (Petrick, 2010). Because the airline industry still faces pressure related to
severe competition from airlines from different countries, capitally-intensive,
technology-driven, has requirements for wages, gas, and infrastructural investments,
an effective performance measurement could be very important for an airline to
survive and prosper in the worlds competitive airline markets.

2.2 The issues of performance evaluation

Over the last few decades, the problem of performance evaluation has attracted
significant attention which led to variety of methods that seek to develop measures to
assess the performance of organizations by systematically obtaining and integrating
 IMDS both subjective and objective data (Ouellette et al., 2010; Lu et al., 2012; Gramani, 2012;
114,1 Lee et al., 2013). These methods range from simple screening procedures to
sophisticated mathematical procedures.
Among others, DEA and the BSC are two of the most important methods to be
discussed. DEA was developed by Charnes et al. (1978) based on a linear programming
technique following the optimization concept of Farrell. DEA is particularly useful
126 where the presence of multiple inputs and outputs makes conventional ratio-based
comparisons difficult. By comparing the relative efficiency of DMUs, DEA is able to
identify the best practice groups of DMUs (benchmark frontiers) and the inefficient
units compared to the best practice units. In the case of inefficient units, DEA can
quantify the amount of improvement (e.g. to save input resources or to improve
services) required for each unit to become one of the efficiency frontiers.
DEA has been widely adopted in different industries to measure the efficiency of
DMUs, including of the airline industry. During the past decade, there have been
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

tremendous efforts to measure operating of the airlines efficiency through DEA.

Roghanian and Foroghi (2010) adopted DEA to measure the relative efficiency of
Iranian regional airlines. Adler and Golany (2001) used DEA for western European
airlines and divided the airlines into efficient and inefficient DMUs. Barros and
Peypoch (2009) used DEA to evaluate the operational performance for Association of
European Airlines (AEA). Pires and Fernandes (2012) adopted Malanguist index to
evaluate the financial efficiency of airlines. Scheraga (2004) used DEA and Tobit
analysis to evaluate operational efficiency and financial mobility in the global airlines
industry. Sengupta (1999) developed a dynamic efficiency of the airlines industry.
Distexhe and Perelman (1994) built a panel data to compare the relative efficiency of 33
airlines. Inglada et al. (2006) used DEA to identify the efficiency of international air
transport under liberalization. Although DEA has been adopted extensively to identify
the relative efficiency among airlines, it was criticized that DEA neglected the
intermediate measures on linking activities (Lu et al., 2012). Aryanezhad et al. (2011)
argued that the performance evaluation should be resided on a continuous
improvement base. Therefore, the integration between DEA and BSC could be very
essential.
The BSC is another popular method of performance evaluation. The idea of the BSC
was created by Kaplan and Norton (1996) who advocated the emphasis of both financial
indicators (lagging indicators) and non-financial indicators (leading indicators)
specifically in regard to aspects related to maintaining customer satisfaction,
continuing internal process improvement, and investing in employee learning and
growth). Kaplan and Norton (2007) emphasized that executives of firms should not only
try to achieve the financial measures referenced above but should also try to arrange
organizational alignment in terms of customers, internal business processes, and
learning and growth. The BSC particularly identifies the cause-and-effect relationship
among leading indicators and lagging indicators (Eilat et al., 2008). Fletcher and Smith
(2004) argued that learning and growth perspectives were the leading indicators of
internal business processes which were also the leading indicators of customer
satisfaction. The three aspects of leading indicators were all influence financial
indicators in the long run. Therefore, the BSC provides a very clear picture for executives
that current good financial performance does not ensure that future financial
performance will be good also; However, current good performance related to customer
 satisfaction, internal business processes, and employees learning and growth will A BSC
ensure that future financial performance will be good (Lee, 2008). Based on the above envelopment
statements, it is important to create an appropriate working environment for the
employees and encourage them to emphasize creativity, learning, and development in approach
the firm (Huang, 2009). Although BSC has been adopted widely by different industries,
there is no formal implementation of the methodology (Lohman et al., 2004). Malina and
Selto (2001) found that the BSC did not provide an opportunity to develop, communicate, 127
and implement strategy in corporate setting.

2.3 An integrated DEA-BSC model

Since both DEA and BSC have several limitations as stated above, an integrated
DEA-BSC approach has been developed in a few studies in the past decades
(Garca-Valderrama et al., 2009). Barker et al. (2004) used integrated BSC-DEA method
to evaluate the generating efficiency of 50 local exchange carriers in the USA. Chen et al.
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

(2008) applied investment risk for operating efficiency of banks in Taiwan, using five
perspective of financial, customer, internal processes, growth and learning, and risk as
the indices and then evaluate the output data through DEA. Harel et al. (2006) and
Garca-Valderrama et al. (2009) adopted BSC-DEA model to evaluate the operating
efficiency of R&D projects. Asosheh et al. (2010) used the integrated BSC model to
analyze the information technology (IT) project. These studies tended to use different
variables to represent customer orientation, internal process improvement, and
financial performance. However, none of the previous BSC-DEA model has been
adopted for the airline industry. This study aims to measure the operating performance
of the airline industry by developing DEA-BSC model. Specifically, this study
incorporates both the lagging and leading factors of BSC for the input/output variables
of DEA to evaluate the relative performance of airlines.
To create a systematic relationship between DEA and the BSC, we summarize the
advantages and disadvantages of both methods in Table I. This study asserts that the
integrated DEA-BSC model could improve the overall capabilities of both models and it
also reduces the faults of each one.

Compatibility BSC DEA

Way of comparison Compared with an ideal virtual Compared with the efficiency frontiers
unit
Variables for review Leading factors/lagging factors Input/output
Mathematical ranking Weak Strong
Applicable of Management by objective (self Management by bench marking
measurement management)
Accuracy of Moderate High
measurement
Ranking Does not support Has
Future view Dealing factors Does not have
Improvement focus Both leading and lagging factors Only output factors
Regarding organizations Emphasis on improving leading Emphasis to improving productivity Table I.
strategy factors (output/input ratio) Proposed differences
between the DEA and
Source: This study and Aryanezhad et al. (2011) BSC method
 IMDS 3. Research design and methodology
114,1 3.1 The research model
The purpose of this study is to evaluate the performance of the airline industry by
integrating DEA and BSC. Since both DEA and BSC have their limitations, the integrated
DEA-BSC model as presented in this study is more advanced than the capabilities of DEA
and BSC alone. On one hand, BSC is a widely acceptable performance measurement
128 system. As Kaplan and Norton (1992) stated, What you measure is what you get. The
leading and lagging factors of BSC are adopted for inputs/outputs of DEA. In other words,
the BSC structure is embedded into DEA model through a balanced consideration. This
integrated model not only can minimize information overload by limiting the number of
measures used (Kaplan and Norton, 1992), but the scorecard also can be developed by
linkage to key success factors (Frigo and Krumwiede, 2000). On the other hand, DEA can
set a benchmark for companies based on their inputs and outputs and can also transform
performance measures into managerial information. According to the purposes of this
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

study, a research framework is developed. As shown in the Figure 1, the DEA will be
implemented by considering the following four perspectives, including a financial
perspective, a customer perspective, an internal-business process perspective, and a
learning and growth perspective (Fletcher and Smith, 2004).
In addition, in order to evaluate the competitive position of airline companies, managers
can apply the integrated DEA-BSC model to identify the efficiency frontier, benchmarking
partners, and inefficient slacks for each of the airlines. It is important for each airline
company to understand its relative position in term of productivity and efficiency. The
results of this study are intended to provide competitive information and learning partners
which are essential for firms to design their long term strategies and objectives.

3.2 Measurement of research variables

Although an integration of DEA and BSC has been adopted in a few studies (Chen et al.,
2008; Garca-Valderrama et al., 2009; Asosheh et al., 2010), none of them has been

Figure 1.
The research conceptual
framework
 adopted in the airline industry. This study selected measurements indicators based on A BSC
Kaplan and Norton (1996) to include both leading factors and lagging factors. envelopment
Specifically, this study identified financial performance as the lagging factors, and
customer orientation, internal process improvement, and learning and growth as the approach
leading factors. In terms of the financial perspective, the first indicator is operating
revenue that recognizes passenger and cargo sales when transportation is provided.
Moreover, return on average assets (ROA) is the second indicator since ROA is used 129
internally by companies to track asset-use over time, to monitor company performance,
and to look at different operations of divisions by comparing them one to the other.
Hill et al. (1992) described ROA as a measure that provides superior annual stability as
compared with other measures, and Baliga et al. (1996) identified ROA as particularly
valuable in multiple industry studies. The third indicator is return on investment (ROI),
since ROI can be increased by increasing sales, decreasing costs, and/or decreasing
investments in operating assets. Previous studies from Kaplan and Norton (1996),
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

Denton and White (2000), also adopted ROI as an indicator under the financial
perspective. Finally, net income is the fourth indicator since it reflects the profitability
arising from airline operations (Olve et al., 2000).
For the customer orientation perspective, the major indicator is the market share
which reflects the competitive position of an airline company. Oxelheim and Ghauri
(2004) described the world airline market share in terms of passenger traffic (revenue
passenger kilometer (RPK)). One RPK is defined as one paying passenger transported
1 km. For example, a flight carrying 140 passengers over a distance of 100 km
generates 140,000 RPKs of airline traffic (Belobaba et al., 2009). In this study, the
customer perspective indicators include the RPK and the number of passengers.
In terms of the internal process improvement perspective, the indicators include fuel
cost, capital cost, and material cost because airlines are considered to evaluate the
internal operating processes critical to success (Kimmel et al., 2010). Thus, these three
indicators are the most likely to be associated with this objective. Due to the fact that
many airline services provide undifferentiated products, if airlines can obtain better
cost efficiency, they will attain a competitive advantage among other airlines.
In terms of the learning and growth perspective, the indicator is the operating
expenses per employee. Since the other operating expenditures include a variety of
things, such as those airport-related expenditures (that is, landing fees, gate agents,
and baggage handlers) and in-flight catering expenditures (Vasigh et al., 2008). If
airlines begin to offer more elaborate services, other operating expenses should be
expected to increase. Being easy areas for immediate cost-cutting, other operating
expenses have shown dramatic reductions, particularly catering. Moreover, within a
service company, particularly the airline industry, the improvement of production
efficiency depend on the quality of employees. Therefore, employees need to be highly
trained to ensure high quality service, which leads to the enhancement of customer
satisfaction (Yilmaz, 2009). Thus, in analyzing the learning and growth perspective,
this study also includes the labor cost as one of the indicators. The measures of all
research variables that adopted in this study are shown in Table II.

3.3 Samples and data collection

For the purpose of parsimony, this study only picked up the major 50 airline companies
in the world according to the total revenue of airlines in the annual report of 2012.
 IMDS
Construct Indicator
114,1
Airline output measurement
Financial perspective Operating revenue (OR)
Return on investment (ROI)
Return on assets (ROA)
130 Net income (NI)
Airline input measurement
Customer perspective Revenue passenger kilometer (RPK)
Number of passengers
Internal business perspective Energy (fuel) cost
Capital cost
Table II. Material cost
The measurements of Learning and growth perspective Labor cost
research construct Other operating expense per employee
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

However, several sample companies were deleted due to the lack of the financial data.
The final valid sample contains 38 airlines. All data were collected through the
financial statements, annual reports, and business reports from each of the airline
company web sites. According to Roll et al. (1989), the rule of thumb was established
that the number of units (DMUs) for DEA should be at least twice the number of inputs
and outputs considered. Since this study contains 11 variables, 38 samples would be
appropriate. Since the scale of the financial variables was based on the local monetary
unit, this study adjusted all of them to US$ (in million).

4. Descriptive statistics and interrelationship among research constructs

4.1 Characteristics of sample airlines
Table III shows the characteristics of the sample airlines. These include four major
items in this study:
(1) region;
(2) employee size
(3) fleet size; and
(4) number of passengers.

The majority of the sample airlines belong to the Asia region (42.1 percent), followed
by Europe (26.3 percent) and America (26.3 percent). As for employee size, the sample
airlines that have employees between 10,000 and 20,000 are 31.6 percent, followed by
employee size less than 10,000 (23.7 percent), employee size more than 40,001
(23.7 percent), and employee size between 20,001 and 30,000 (15.8 percent). Three
groups of airlines (i.e. group 1: 100-200 carries; group 2: 201-300 carriers; group 3: more
than 300 carriers) account for nearly the same fleet size (26.3 percent) and the
other group of airlines (carriers less than 100) account for 21.1 percent. Finally,
approximately 34.2 percent of the sample airlines have passengers between
15-30 million per year, followed by more than 46 million (31.6 percent), less than
15 million (18.4 percent), and 11-45 million (15.8 percent).
Table IV provides descriptive statistics of the variables used in the DEA model for
38 sample airlines relative to the year 2012, including mean values, standard deviations,
 A BSC
Item Description Frequency Percent
envelopment
Region Asia 16 42.1 approach
Europe 10 26.3
America 10 26.3
Australia and Oceania 2 5.3
Employee size Less than 10,000 employees 9 23.7 131
10,000-20,000 employees 12 31.6
20,001-30,000 employees 5 13.2
30,001-40,000 employees 3 7.9
More than 40,001 employees 9 23.7
Fleet size Less than 100 carriers 8 21.1
100-200 carriers 10 26.3
201-300 carriers 10 26.3
More than 301 carriers 10 26.3
Numbers of passengers (per year) Less than 15 millions 7 18.4
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

15-30 millions 3 34.2 Table III.

31-45 millions 6 15.8 Characteristics of the
More than 46 millions 12 31.6 sample airlines

Variable Unit Mean SD Min. Max.

Output variable
Operational revenue US$ 13,400.15 18,632.51 12 107,110
ROA % 13.16 24.32 0.00001 110
ROI % 80.77 193.61 0.00001 940
NI US$ 593.13 1,773.33 0.00001 10,956
Input variable
Material US$ 19,293.16 103,506.87 7 640,298
Energy US$ 6,275.73 16,144.27 30 101,346
Capital US$ 1,684.66 3,227.47 7.48 19,154.57 Table IV.
Passenger US$ 41,542,322.03 34,047,469.69 4,260,000 140,441,000 Descriptive statistics
RPK US$ 85,724.41 77,542.09 7,293 330,696 show the mean, SD,
Labor US$ 22,240.03 124,292.46 7 768,128.00 minimum, and maximum
Other operating expense US$ 9,215.5736 47,618.21 2.30 294,050.00 of concerned variable

minimum values, and maximum values. The sample airlines perform average
annual operational revenue of US$13,400.15 million, ROA of 13.16 percent, ROI of
80.77 percent and net income US$593.13 million. The highest two input items are the
annual labor cost (US$22,240.03 million) and the annual other operating expenses
(US$9,215.57 million)

4.2 Interrelationships among four perspectives of the BSC

In order to examine the interrelationships between four perspectives of the BSC,
canonical correlation analyses were used in this study. Detailed information for the
canonical results is shown in Figure 2. First, the relationship between the linear
combination of three internal business perspective variables and that of four financial
 IMDS Labor 11 31 Material
No.3 32
114,1 Learning and
Growth
Internal Process
Perspective
Energy
Other 12 33 Capital
No.2 No.5

132 No.1 No.6

41 OPrevenue
Passenger 21 42
Customer Financial ROI
Orientation Performance 43
RPK 22 No.4 ROA
44
NI

Canonical Loading
Learning & Growth Customer Learning & Growth Financial Learning & Growth Internal business
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

perspective
N 1 Canonical Test N 2 Canonical Test N 3 Canonical Test
11 = n.s. 11 = n.s. 11 = n.s.
12 = n.s. 12 = n.s 12 = n.s
21 = 0.976 41 = 0.616 31 = 0.141
22 = 0.664 42 = 0.351 32 = 0.291
43 = 0.444 33 = 0.388
44 = 0.282
R12 = 0.03449 R22 = 0.01109 R32 = 0.02425
Eigenvalues= 0.03572 Eigenvalues = 0.01122 Eigenvalues = 0.02486
RI1 = n.s. RI2 = n.s. RI3 = n.s.
F-Value = 0.30179 F-Value = 0.06322 F-Value = 0.14614
p-value = 0.876 p-value = 1.000 p-value = 0.989
Customer Financial Internal business perspective Customer Internal business perspective Financial
N 4 Canonical Test N 5 Canonical Test N 6 Canonical Test
21 = n.s. 31 = 0.04427 31 = 0.89949
22 = n.s. 32 = 0.13191 32 = 0.95970
33 = 0.09911 33 = 0.89669
41 = 0.39875 21 = 0.68543 41 = 0.99588
42 = 0.59683 22 = 0.98321 42 = 0.18235
43 = 0.51695 43 = 0.10064
44 = 0.04971 44 = 0.02914
Figure 2. R42 = 0.17688 R62 = 0.57433 R52 = 0.90049
Canonical correlations Eigenvalues = 0.21489 Eigenvalues= 1.70885 Eigenvalues = 9.04957
among the four BSC RI4 = n.s. RI6 = 0.718 RI5 = 0.259
perspectives F-Value = 1.17554 F-Value = 7.15598 F-Value = 9.99711
p-value = 0.328 p-value < 0.000 p-value < 0.000

perspective variables has a canonical correlation R 2-value of 0.90049 with

p-value , 0.0001. The redundancy index is quite high (RI5 0.259) indicating that
25.9 percent of the variance on financial perspective can be explained by internal process
improvement. Second, the relationship between the set of three internal process
improvement variables with the set of two customer perspective variables has a
canonical correlation R 2-value 0.57433 with p-value , 0.0001. The redundancy index is
very high (RI6 0.718) indicating that 71.8 percent of the variance on customer
perspective can be explained by internal process improvement.
In summary, from six canonical analyses, only two relationships are significant.
This result seems to suggest that the four perspectives of BSC are independent.
However, internal process improvement is highly related to customer orientation and
financial performance.
 5. Results and discussion A BSC
The detailed DEA results are shown in Table V. Production efficiency (CRS) was envelopment
calculated based on a CCR model. Production efficiency equals to 1 demonstrates that
the DMU has achieved highest efficiency relative to other DMUs, whereas production approach
efficiency less than 1 demonstrates the DMU to be inefficient relative to other DMUs.
Table V reveals that 27 airline DMUs had excellent performance. However, there were
11 inefficient DMUs which need to improve their performance according to the 133
operating mode of other airlines. For example, No. 37 DMU ( JetBlue Airways) should
learn from No. 11, 10, 17, 12, and 2 DMUs. Table V also shows that, among inefficient
airlines there was 1 DMUs in the condition of decreasing return scale (DRS) and there
were 11 DMUs in the condition of increasing return scale (IRS). At the individual airline
level, the efficiency slacks measures how much output should be proportionally
expanded by using the same amount of inputs. For example, the scale efficiency score
of Gol Linhas Aereas of Brazil (No. 38 DMU) is 0.577, implying that the efficiency of
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

this airline is far behind the benchmarking airlines, such as Luthfansa, Jet Airways,
Norwegian Air, Air China, Korean Airlines, British Airways, Japan Airlines,
Scandinavian Airlines, etc.
Based on the above results, it can be concluded that although 27 of 38 airlines are
performed in efficient frontiers, there are still 11 airlines that need to be improved. As a
summary, the integrated DEA-BSC model is useful for decision-making units of
airlines because it provides information on how much an airline can decrease input
without decreasing output, or how much an airline can increase output by keeping the
same inputs.
Table VI shows the slacks of input of airlines that need to be improved without
changing output factors. For example, as shown in Table VI, Gol Linhas Aereas
(No. 38 of DMU) needs to improve 0.126 percent of ROA, and 195.567 percent of ROI,
and increase 199.941 millions of net income to become efficient. Once Gol Linhas
Aereas can improve this operating performance, then it becomes one of the members of
efficiency frontiers.
Table VII shows the slacks of input of the airlines have to improve without
changing any output factors. For example, No. 37 of DMUs ( JetBlue Airlines in the
USA) needs to reduce US$41.704 million of material cost, US$537.733 millions of labor
cost and $367.356 million of the other operating expense in order to become efficiency
frontiers.
Table VIII shows the percentage of improvement required for each airline to achieve
an efficiency frontier. The input slacks suggest how many percentage points should be
reduced for each input item, including material cost, energy cost, labor cost, and other
operating expense. For example, Easy Jet should reduce material cost by 74.5 percent,
labor cost by 41.1 percent and the other operating expenses by 43.8 percent of the input
slacks in order to achieve efficiency frontier. On the other hand, if Easy Jet decides to
maintain the same level of the input variables, then ROI should be increased by
88.77 percent in order to achieve the status of efficiency frontier. These results could be
very useful for a firms manager to identify the benchmarks for further improvements.
Norman and Barry (1991) proposed that DMUs could be classified according to
levels of efficiency. The first category is the most robustly efficient unit. The DMUs in
this category are not only efficient but also meet the other DMUs benchmark. The
second category is the marginally inefficient units which efficiency value is
 Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

134
114,1

industry
IMDS

Table V.
The efficiency and

DMU for the airline

benchmark peers of each
DMU Airline Country Strategic alliance CRS VRS Scale Peers Peer count

1 Lufthansa Germany Yes 1 1 1 1 0

2 Jet Airways India No 1 1 1 2 11
3 Norwegian Air Norway No 1 1 1 3 1
4 Air China China Yes 1 1 1 4 1
5 Korean Air Korean Yes 1 1 1 5 0
6 British Airways UK Yes 1 1 1 6 0
7 Japan Airlines Japan Yes 1 1 1 7 3
8 Scandinavian Airlines Sweden Yes 1 1 1 8 0
9 All Nippon Airlines Japan Yes 1 1 1 9 0
10 United Continental Airlines USA Yes 1 1 1 10 10
11 Cathay Pacific Hong Kong Yes 1 1 1 11 10
12 LATAM Group Chile Yes 1 1 1 12, 2 9
13 Singapore Airlines Singapore Yes 1 1 1 13 1
14 SkyWest Airlines USA No 1 1 1 14 0
15 Thai Airways Thailand Yes 1 1 1 15 0
16 Aer Lingus Ireland No 1 1 1 16 0
17 China Airlines Taiwan Yes 1 1 1 17 10
18 Emirates Group Uni Emirate Arab No 1 1 1 18 0
19 Garuda Indonesia Indonesia No 1 1 1 19 0
20 EVA Air Taiwan Yes 1 1 1 20 4
21 Royal Dutch Airlines (KLM) The Netherlands Yes 1 1 1 21 3
22 Air Asia Malaysia No 1 1 1 22 1
23 China Southern Airlines China Yes 1 1 1 23 1
24 Oman Air Oman No 0.919 1 0.919 IRS 24 1
25 American Airlines USA Yes 0.896 1 0.896 DRS 25 0
26 Fin Air Finland Yes 0.896 1 0.896 IRS 26 1
27 Delta Airlines USA Yes 0.782 1 0.782 DRS 27 0
28 Air New Zealand New Zealand No 0.729 0.987 0.739 IRS 12, 17, 24, 20, 11, 2, 21 0
29 Easy Jet UK No 0.920 0.929 0.990 IRS 12, 10, 11, 2, 17 0
30 Air Canada Canada Yes 0.883 0.893 0.989 IRS 12, 26, 17, 13, 21, 10, 11, 2 0
31 Qantas Group Australia Yes 0.843 0.871 0.968 IRS 20, 7, 11, 10, 12, 2 0
32 Malaysia Airlines Malaysia Yes 0.737 0.807 0.914 IRS 20, 17, 7, 11, 2, 21 0
33 Turkish Airlines Turkey Yes 0.780 0.780 1 11, 2, 12, 17, 4, 10, 20 0
34 Alaska Airlines USA No 0.767 0.777 0.988 IRS 11, 17, 12, 10, 2 0
35 Southwest Airlines USA No 0.733 0.747 0.981 DRS 7, 12, 11, 23, 17, 10 0
36 Ryan Air Ireland No 0.702 0.707 0.993 IRS 2, 12, 10, 17, 11, 21 0
37 JetBlue Airlines USA No 0.695 0.703 0.989 IRS 11, 10, 17, 12, 2 0
38 Gol Linhas Aereas Brazil No 0.539 0.577 0.934 IRS 3, 10, 22, 17, 2 0
 A BSC
DMU Operating revenue Return on assets Return on investment Net income
envelopment
1 0 0 0 0 approach
2 0 0 0 0
3 0 0 0 0
4 0 0 0 0
5 0 0 0 0 135
6 0 0 0 0
7 0 0 0 0
8 0 0 0 0
9 0 0 0 0
10 0 0 0 0
11 0 0 0 0
12 0 0 0 0
13 0 0 0 0
14 0 0 0 0
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

15 0 0 0 0
16 0 0 0 0
17 0 0 0 0
18 0 0 0 0
19 0 0 0 0
20 0 0 0 0
21 0 0 0 0
22 0 0 0 0
23 0 0 0 0
24 0 0 0 0
25 0 0 0 0
26 0 0 0 0
27 0 0 0 0
28 0 10.967 341.281 0
29 0 0 555.434 0
30 0 0 26.298 0
31 0 0.516 399.657 0
32 0 0 653.515 115.086
33 0 38.046 0 0
34 0 0 597.803 0
35 0 0 1.248 0
36 0 34.066 213.031 0 Table VI.
37 0 0 605.735 0 Slacks of outputs for the
38 0 0.126 195.567 199.941 airline industry

between 0.8 and 1. If the DMUs are in this category, these firms should adjust their
inputs or outputs in order to achieve efficient status. The third category is the
distinctly inefficient units which efficiency values was lower than 0.8. Table IX shows
the comparisons of the three groups with different level of airline attributes. The
results indicate that airline with higher employee size, fleet size, and other input
variables tend to perform higher operating revenues, but may not achieve higher levels
of cost advantages for the input variables, and consequently their ROA and ROI may
not be increased.
Airlines in the sample presenting different category of technical and scale efficiency
are shown in Table X. The technical efficiency between 90 and 100 percent under
 IMDS
Number of Other operating
114,1 DMU Material Energy Capital passengers RPK Labor expense

1 0 0 0 0 0 0 0
2 0 0 0 0 0 0 0
3 0 0 0 0 0 0 0
136 4 0 0 0 0 0 0 0
5 0 0 0 0 0 0 0
6 0 0 0 0 0 0 0
7 0 0 0 0 0 0 0
8 0 0 0 0 0 0 0
9 0 0 0 0 0 0 0
10 0 0 0 0 0 0 0
11 0 0 0 0 0 0 0
12 0.019 0.034 0.011 0.001 0.949 0 0.011
13 0 0 0 0 0 0 0
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

14 0 0 0 0 0 0 0
15 0 0 0 0 0 0 0
16 0 0 0 0 0 0 0
17 0 0 0 0 0 0 0
18 0 0 0 0 0 0 0
19 0 0 0 0 0 0 0
20 0 0 0 0 0 0 0
21 0 0 0 0 0 0 0
22 0 0 0 0 0 0 0
23 0 0 0 0 0 0 0
24 0 0 0 0 0 0 0
25 0 0 0 0 0 0 0
26 0 0 0 0 0 0 0
27 0 0 0 0 0 0 0
28 3.032 0 0 0 0 51.019 0
29 1,857.671 0 0 32.441 56,836.501 287.060 141.784
30 735.148 0 0 0 0 0 1,101.969
31 0 0 0 0 29,777.198 854.764 986.671
32 0 0 0 0 14,254.833 304.838 461.475
33 1,131.003 84.356 0 0 0 0 23,829.620
34 135.355 0 0 3.606 1,725.444 643.146 55.407
35 0 0 0 28.462 19,818.676 3,475.293 1,626.099
Table VII. 36 558.349 0 0 45.234 63,570.998 0 0
Slacks of inputs for 37 41.704 0 0 3.474 8,031.885 537.733 367.356
the airline industry 38 0 0 0 22.014 0 375,564.637 143,770.363

variable return to scale (VRS) technology accounts for 76.3 percent, while average scale
efficiency for the same category accounts for 89.4 percent. These two measures indicate
that some airlines have considerable room to improve their operation. A better
combination of available inputs might result in producing 13.1 percent more output,
while adjustment in the production scale might increase output by 10.6 percent.
Given the wide variation among the efficiency scores, we are interested in whether
VRS efficiency scores may be relevant in explaining the differences among the sample
airlines. The first step is to determine the number of clusters. Three groups suggested
from hierarchical cluster analysis were included. Then, the total sample was divided
 Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

Input slacks Output targets

Airlines Material (%) Energy (%) Passengers (%) RPK (%) Labor (%) Other OE (%) ROA (%) ROI (%) NI (%)

Air New Zealand (98.7%) 20.6 211.7 85.7 86.7

Easy Jet (92.9%) 274.5 2 55.5 2 53.9 241.1 243.8 88.7
Air Canada (89.3%) 219.8 284 60.1
Qantas (87.1%) 2 50.2 242.7 273.6 45.4 96.7
Malaysia Airlines (80.7%) 2 37.4 237.1 270.1 98.3 100
Turkish Airlines (78.0%) 238.3 22.93 297.7 83.2
Alaska Airlines (77.7%) 214.8 2 13.9 2 4.4 257.1 222.3 97.9
Southwest Airlines (74.7%) 2 26.0 2 12.0 273.6 278.8 15.2
Ryan Air (70.7%) 234.6 2 57.0 2 51.3 79.0 82.3
JetBlue Airways (70.3%) 25.1 2 12.0 2 14.9 251.5 266.9 98.4
Gol Linhas Aereas (57.7%) 2 56.2 299.9 299.9 0.43 59.5 100
Mean (%) 226.81 22.930 2 32.88 2 35.04 251.78 262.39 53.6 78.1 94.1
SD (%) 225.23 2 22.01 2 21.31 226.30 231.62 40.0 26.6 10.2
Median (%) 219.80 22.930 2 26.00 2 43.80 246.90 270.10 64.3 87.7 100
approach
envelopment

technically inefficient
Percent potential
A BSC

improvements for 11 pure

Table VIII.
137

airlines
 IMDS
Group 1 Group 2 Group 3
114,1 Higher group Middle group Lower group
Name of variables (n 3) (n 9) (n 24) F-value p-value

Material cost ($millions) 8,398.3333 3,245.1556 1,562.2863 10.593 0.000

Energy cost ($millions) 11,017.6667 4,484.6633 2,578.5578 20.102 0.000
138 Capital cost ($millions) 1,103.1613 1,305.5433 1,218.0707 0.024 0.976
Number of passengers (millions) 119.9667 54.8000 28.2958 22.871 0.000
Table IX. RPK ($millions) 303,921.8667 122,050.7489 22,115.5492 179.085 0.000
Comparison among Labor cost ($millions) 5,685.6667 2,740.7344 1,063.7685 12.524 0.000
sample airlines with Other operating revenue ($millions) 1,879.3333 1,048.1989 1,557.2144 0.066 0.936
different levels of airline Employee size 92,456.6667 35,099.3333 19,159.5000 24.985 0.000
attributes Fleet size 681.6667 298.4444 181.0000 19.630 0.000
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

Technical efficiency (VRS) Scale efficiency

Efficiency range No. of airlines % of airlines No. of airlines % of airlines

0-60% 1 2.6 0 0.0

60-80% 5 13.2 2 5.3
80-90% 3 7.9 2 5.3
90-100% 29 76.3 34 89.4
Table X. Total 38 100.0 38 100.0
Frequency distributions Mean 0.941 0.973
and descriptive statistics SD 0.111 0.059
for technical and scale Min. 0.577 0.739
efficiency scores Max. 1.000 1.000

into three groups using a k-means cluster analysis, including VRS of technical
efficiency (VRSTE) 1, VRSTE 0.8-0.99 and VRSTE , 0.79. As shown in Table XI,
airline companies with the VRSTE , 0.8 may need the highest amount of
improvement; these include Turkish Airlines, Alaska Airlines, Ryan Airlines,
JetBlue Airways, Gol Linhas Aereas, etc.

6. Conclusions
This study presented a new DEA-BSC model to measure the overall performance of the
airlines industry. To integrate the concept of BSC (Kaplan and Norton, 1992) into DEA,
this proposed model has considered four major BSC factors as the input/output
parameters for DEA. By the implementation of DEA, the technical efficiency of the
38 major airlines in the world was generated and compared to identify the efficient
frontier group and inefficient group. Several conclusions can be drawn from our
results. First of all, the function of DEA is to identify efficiency frontiers,
benchmarking partners, and inefficient slacks of DMUs. By integrating seven input
and four output parameters from BSC into DEA implementation, the result become
more meaningful. Specifically, the DEA-BSC model as presented in this study is more
advanced than the capabilities of individual DEA or BSC. From the viewpoint of DEA,
it could accommodate leading and lagging variables of BSC and identify the
relationships between these variables. From the viewpoint of BSC, it can evaluate the
 A BSC
Group name Airline name
envelopment
Group 1 Lufthansa Thai Airways approach
VRSTE 1 (n 27) Jet Airways Aer Lingus
Norwegian Air Shuttle China Airlines
Air China Emirates Group
Korean Air Garuda Indonesia 139
British Airways Eva Air
Japan Airlines Royal Dutch Airlines (KLM)
Scandinavian Airlines Air Asia
All Nippon Airways China Southern Airlines
United Continental Airlines Oman Air
Cathay Pacific American Airlines
Latam Group Fin Air
Singapore Airlines Delta Airlines
SkyWest Airlines
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

Group 2 Air New Zealand

VRSTE 0.8-0.99 (n 5)
Group 3
VRSTE , 0.8 (n 6)
EasyJet
Air Canada
Qantas
Malaysia Airlines
Turkish Airlines
Alaska Airlines
Southwest Airlines Table XI.
Ryanair Clustering of sample
JetBlue Airways airlines according to
Gol Linhas Aereas group efficiency

performance of DMUs through a quantitative comparison between the efficient and

inefficient DMUs. Since none of previous studies have integrated BSC and DEA to
assess the operational efficiency of the airlines industry, the results of this study has
served as a baseline for further academic validation. The proposed model of this study
can eliminate the faults of DEA and BSC individually.
Second, the DEA-BSC model can be used to perform optimization analysis on every
individual DMUs to generate relative efficiency values. By comparing the relative
efficiency values and slacks with other DMUs, managers of the airlines can design
certain strategies to catch up, using the efficiency frontiers as the benchmark
learning partners. Specifically, among 38 airlines, 27 achieve the efficiency score of
1.00, five achieve the efficiency score between 0.807 and 0.987, another five between
0.703 and 0.780; one airline has the efficiency score of 0.577. These efficiency scores are
all below 1.00, which implies that there are rooms for these 11 airlines to improve.
Using the inputs and outputs of the benchmark partners, the managers can develop
certain strategies to either increase the outputs without changing inputs, or decrease
the inputs without changing outputs. It is recommended that for these airlines whose
efficiency scores are lower than 0.80, strategic changes are required to become more
competitive.
Third, airline managers should put their efforts on monitoring operational
efficiency among competitors. Through the implementation of DEA-BSC, managers
should be able to find the efficient frontiers and also to determine the origins
 IMDS of inefficiency. Particularly, the amount of slacks and the amount of operational
114,1 efficiency that airlines need to improve are essential for top management leaders to
identify strategies and methods that airlines should exert in order to be both efficient
and competitive.
Fourth, the results of DEA-BSC analysis can serve as baseline of management by
objectives (MBO). Managers can use the results of DEA-BSC to improve and become
140 more competitive. Airlines that are not listed at the efficient frontier should select
benchmark partners based on the results of this study. The managers of these
inefficient airlines should make their best efforts to examine the model of resource
allocations and operations of the benchmark airlines and follow their business model to
catch up. The slacks required to improve can be used as a guideline for resource
allocations and strategic moves to improve efficiency.
In summary, the integrated DEA-BSC model is a useful framework for both
academic and practitioners to identify the interrelationships among four perspectives
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

of BSC, the efficient frontiers, the input slacks, and the benchmark learning partners.
There are some limitations and suggestions for future research. First of all, this
study employed a cross-sectional research design to analyze the sample. The data was
collected from annual report in 2012 as our sample. Future research can develop a
longitudinal study using the integrated DEA-BSC model as proposed in this study. By
doing so, a more complete understanding of airline efficiency analysis may be
achieved. Second, this study used seven input variables as the leading factors and four
output variables as the lagging factors to implement DEA. These factors may not be
sufficient to all types of airlines. Future studies might refine the input and output
variables based on the objectives of each type of airlines. Third, airline industry may
face upon different subsidized policies and taxation rules, which may seriously
influence the financial performance of the airlines. Future studies can investigate these
discrepancies and make appropriate adjustments. Finally, the technical efficiency as
evaluated in this study does not take into account any differences of the quality of the
input and output variables (such as service quality and labor quality). Therefore, the
technical efficiency estimates of the airlines are likely to be underestimated. Future
research can put service quality and labor quality as the additional inputs.

References
Adler, N. and Golany, B. (2001), Evaluation of deregulated airlines networks using data
development analysis combined with principal component analysis with an application to
Western Europe, European Journal of Operation Research, Vol. 132 No. 2, pp. 260-273.
Aryanezhad, M.B., Najafib, E. and Bakhshi, F.S. (2011), A BSC-DEA approach to measure the
relative efficiency of service industry: a case study of banking sector, International
Journal of Industrial Engineering Computations, Vol. 2 No. 2, pp. 273-282.
Asosheh, A., Nalchigar, S. and Jamporazmey, M. (2010), Information technology project
evaluation: an integrated data envelopment analysis and balanced scorecard approach,
Expert Systems with Applications: An International Journal, Vol. 37 No. 8, pp. 5931-5938.
Assaf, A. (2009), Are US airlines really in crisis?, Tourism Management, Vol. 30 No. 6,
pp. 916-921.
Badra, D. (2009), Race to the bottom or swimming upstream: performance analysis of US
airlines, Journal of Air Transport Management, Vol. 15 No. 5, pp. 227-235.
 Baliga, B.R., Moyer, R.C. and Rao, R.S. (1996), CEO duality and firm performance: whats the A BSC
fuss?, Strategic Management Journal, Vol. 17 No. 1, pp. 41-53.
Barbot, C., Costa, A. and Sochirca, E. (2008), Airlines performance in the new market context:
envelopment
a comparative productivity and efficiency analysis, Journal of Air Transport approach
Management, Vol. 14 No. 5, pp. 270-274.
Barker, G., Hill, R.C., Bowen, P.A. and Evans, K. (2004), Economic and regulatory approaches to
improve the environmental performance of buildings in South Africa, Acta Structilia, 141
Vol. 11 Nos 1/2, pp. 1-25.
Barros, C.P. and Peypoch, N. (2009), An evaluation of European airlines operational
performance, International Journal of Production Economics, Vol. 122 No. 2, pp. 525-533.
Belobaba, P., Odoni, A. and Barnhart, C. (2009), The Global Airline Industry, Wiley, London.
Bjelicic, B. (2012), Financing airlines in the wake of the airline markets crisis, Journal of Air
Transport Management, Vol. 21, pp. 10-16.
Budd, L.C.S. (2012), The influence of business models and carrier nationality on airline liveries:
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

an analysis of 637 airlines, Journal of Air Transport Management, Vol. 23, pp. 63-68.
Charnes, A., Cooper, W. and Rhodes, E. (1978), Measuring the efficiency of decision making
units, European Journal of Operational Research, Vol. 2 No. 6, pp. 429-444.
Chen, C.F. and Chen, S.C. (2012), Scale development of safety management system evaluation for
the airline industry, Accident Analysis and Prevention, Vol. 47, pp. 177-181.
Chen, T., Chen, C. and Peng, S. (2008), Firm operation performance analysis using data
envelopment analysis and balanced scorecard: a case study of a credit cooperative bank,
International Journal of Productivity and Performance Management, Vol. 57 No. 7,
pp. 523-539.
Denton, G.A. and White, B. (2000), Implementing a balanced-scorecard approach to managing
hotel operations, Cornell Hotel & Restaurant Administration Quarterly, Vol. 41 No. 1,
pp. 94-107.
Distexhe, V. and Perelman, S. (1994), Technical efficiency and productivity growth in an era of
deregulation: the case of airlines, Swiss Journal of Economics and Statistics, Vol. 130 No. 4,
pp. 669-689.
Eilat, H., Golany, B. and Shtub, A. (2008), R&D project evaluation: an integrated DEA and
balanced scorecard approach, OMEGA: The International Journal of Management
Science, Vol. 36, pp. 895-912.
Fletcher, H.D. and Smith, D.B. (2004), Managing for value: developing a performance
measurement system integrating economic value added and the balanced scorecard in
strategic planning, Journal of Business Strategies, Vol. 21 No. 1, pp. 1-18.
Frigo, M.L. and Krumwiede, K.R. (2000), The balanced scorecard, Strategic Finance, Vol. 81
No. 7, pp. 50-54.
Garca-Valderrama, T., Mulero-Mendigorri, E. and Revuelta-Bordoy, D. (2009), Relating the
perspectives of the balanced scorecard for R&D by means of DEA, European Journal of
Operational Research, Vol. 196 No. 3, pp. 1177-1189.
Gramani, M.C.N. (2012), Efficiency decomposition approach: a cross-country airline analysis,
Expert Systems with Applications, Vol. 39 No. 5, pp. 5815-5819.
Harel, E., Boaz, G. and Avraham, S. (2006), Constructing and evaluating balanced portfolios of
R&D projects with interactions: a DEA based methodology, European Journal of
Operational Research, Vol. 172, pp. 1018-1039.
Hill, C.W., Hitt, M.A. and Hoskisson, R.E. (1992), Cooperative vs. competitive structures in
diversified firms, Organization Science, Vol. 3 No. 4, pp. 501-521.
 IMDS Holloway, S. (2008), Straight and Level: Practical Airline Economics, Ashgate, Aldershot.
114,1 Huang, H.C. (2009), Designing a knowledge-based system for strategic planning: a balanced
scorecard perspective, Expert Systems with Applications, Vol. 36 No. 1, pp. 209-218.
Hung, Y.F. and Chen, C.H. (2013), An effective dynamic decision policy for the revenue
management of an airline flight, International Journal of Production Economics, Vol. 144
No. 2, pp. 440-450.
142 Inglada, V., Rey, B., Rodriguez-Alvarez, A. and Coto-Millan, P. (2006), Liberalisation and
efficiency in international air transport, Transportation Research Part A, Vol. 40 No. 2,
pp. 95-105.
Kaplan, R.S. and Norton, D.P. (1992), The balanced scorecard measures that drive
performance, Harvard Business Review, Vol. 70 No. 1, pp. 71-79.
Kaplan, R.S. and Norton, D.P. (1996), The Balanced Scorecard: Translating Strategy into Action,
Harvard Business Press, Boston, MA.
Kaplan, R.S. and Norton, D.P. (2007), Using the balanced scorecard as a strategic management
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

system, Harvard Business Review, Vol. 74 No. 1, pp. 75-85.

Kimmel, P.D., Kieso, D.E. and Weygandt, J.J. (2010), Accounting: Tools for Business Decision
Makers, Wiley, New York, NY.
Lee, M.P. (2008), A review of the theories of corporate social responsibility: its evolutionary path
and the road ahead, International Journal of Management Reviews, Vol. 10 No. 2, pp. 53-73.
Lee, S., Seo, K. and Sharma, A. (2013), Corporate social responsibility and firm performance in
the airline industry: the moderating role of oil prices, Tourism Management, Vol. 38,
pp. 20-30.
Liou, J.J.H. (2012), Developing an integrated model for the selection of strategic alliance partners
in the airline industry, Knowledge-Based Systems, Vol. 28 No. 1, pp. 59-67.
Lohman, C., Fortuin, L. and Wouters, M. (2004), Designing a performance measurement system:
a case study, European Journal of Operational Research, Vol. 156 No. 2, pp. 267-286.
Lu, W.M., Wang, W.K., Hung, S.H. and Lu, E.T. (2012), The effects of corporate governance on
airline performance: production and marketing efficiency perspectives, Transportation
Research Part E: Logistics and Transportation Review, Vol. 48 No. 2, pp. 529-544.
Malina, M.A. and Selto, F.H. (2001), Communicating and controlling strategy: an empirical
study of the effectiveness of the balanced scorecard, Journal of Management Accounting
Research, Vol. 13 No. 1, pp. 47-90.
Merkert, R. and Morrell, P.S. (2012), Mergers and acquisitions in aviation management and
economic perspectives on the size of airlines, Transportation Research Part E, Vol. 48
No. 4, pp. 853-862.
Norman, M. and Barry, S. (1991), Data Envelopment Analysis: The Assessment of Performance,
Wiley, New York, NY.
OConnor, W.E. (2001), An Introduction to Airline Economics, 6th ed., Greenwood Publishing
Group, Westport, CT.
Olve, N.G., Roy, J. and Wetter, M. (2000), Performance Drivers: A Practical Guide to Using the
Balanced Scorecard, Wiley, Chichester.
Ouellette, P., Petit, P., Tessier-Parent, L.P. and Vigeant, S. (2010), Introducing regulation in the
measurement of efficiency, with an application to the Canadian air carriers industry,
European Journal of Operational Research, Vol. 200 No. 1, pp. 216-226.
Oum, T.H. and Yu, C. (1998), Winning Airlines: Productivity and Cost Competitiveness of the
Worlds Major Airlines, Springer, New York, NY.
 Oxelheim, L. and Ghauri, P. (2004), European Union and the Race for Foreign Direct Investment A BSC
in Europe, Elsevier, Amsterdam.
Petrick, N. (2010), Entry and Exit in the Post-Liberalized German Airline Market, GRIN Verlag,
envelopment
San Francisco, CA. approach
Pires, H.M. and Fernandes, E. (2012), Malmquist financial efficiency analysis for airlines,
Transportation Research Part E, Vol. 48 No. 5, pp. 1049-1055.
Roghanian, E. and Foroghi, A. (2010), An empirical study of Iranian regional airports using 143
robust data envelopment analysis, International Journal of Industrial Engineering
Computations, Vol. 1 No. 1, pp. 65-72.
Roll, Y., Golany, B. and Seroussy, D. (1989), Measuring the efficiency of maintenance units in the
Israeli Air Force, European Journal of Operational Research, Vol. 43, pp. 136-142.
Schefczyk, M. (1993), Operational performance of airlines: an extension of traditional
measurement paradigms, Strategic Management Journal, Vol. 14 No. 4, pp. 301-317.
Scheraga, C.A. (2004), Operational efficiency versus financial mobility in the global airline
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

industry: a data envelopment and Tobit analysis, Transportation Research Part A: Policy
and Practice, Vol. 38 No. 5, pp. 383-404.
Sengupta, J.K. (1999), Dynamic and Stochastic Efficiency Analysis: Economics of Data
Envelopment Analysis, World Scientific Publishers, London.
Tone, K. and Tsutsui, M. (2010), An epsilon-based measure of efficiency in DEA a third pole of
technical efficiency, European Journal of Operational Research, Vol. 207 No. 3,
pp. 1554-1563.
Tsai, W.H., Lee, K.C., Liu, J.Y., Lin, H.L., Chou, Y.W. and Lin, S.J. (2012), A mixed activity-based
costing decision model for green airline fleet planning under the constraints of the
European Union Emissions Trading Scheme, Energy, Vol. 39 No. 1, pp. 218-226.
Vasigh, B., Fleming, K. and Tracker, T. (2008), Introduction to Air Transport Economics,
Ashgate, Aldershot.
Yilmaz, K. (2009), The Balanced Scorecard: Implementation in Non-Profit Organizations, GRIN
Verlag, San Francisco, CA.

Further reading
Eilet, H., Golany, B. and Shtub, A. (2006), Constructing and evaluating balanced portfolios of
R&D projects with interactions: a DEA based methodology, European Journal of
Operational Research, Vol. 172 No. 3, pp. 1018-1039.
Zhang, A. and Czerny, A.I. (2012), Airports and airlines economics and policy: an interpretive
review of recent research, Economics of Transportation, Vol. 1 Nos 1/2, pp. 15-34.

Corresponding author
Wann-Yih Wu can be contacted at: wanyi@mail.ncku.edu.tw

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints
 This article has been cited by:

1. Mark R. Greer Airline Mergers in the United States since 2005: What Impact Have They Had on Airline
Efficiency? 161-195. [Abstract] [Full Text] [PDF] [PDF]
2. Ye Li, Yan-zhang Wang, Qiang Cui. 2016. Has airline efficiency affected by the inclusion of aviation into
European Union Emission Trading Scheme? Evidences from 22 airlines during 20082012. Energy 96,
8-22. [CrossRef]
3. Ye Li, Yan-zhang Wang, Qiang Cui. 2016. Energy efficiency measures for airlines: An application of
virtual frontier dynamic range adjusted measure. Journal of Renewable and Sustainable Energy 8:1, 015901.
[CrossRef]
4. Ye Li, Yan-zhang Wang, Qiang Cui. 2015. Evaluating airline efficiency: An application of Virtual Frontier
Network SBM. Transportation Research Part E: Logistics and Transportation Review 81, 1-17. [CrossRef]
5. Yong Zha The School of Management, University of Science and Technology of China, Hefei, China
Jun Wang The School of Management, University of Science and Technology of China, Hefei, China
Downloaded by University of Ghana At 17:13 27 June 2016 (PT)

Zhao Linlin The School of Management, University of Science and Technology of China, Hefei, China
Liang Liang School of Management, University of Science and Technology of China, Heifei, China .
2015. Efficiency improvement based upon overall value judgment and weight restriction. Kybernetes 44:5,
721-738. [Abstract] [Full Text] [PDF]
6. Sreekanth Mallikarjun. 2015. Efficiency of US airlines: A strategic operating model. Journal of Air
Transport Management 43, 46-56. [CrossRef]
7. Muhammet Enis Bulak Department of Industrial Engineering, Fatih University, Istanbul, Turkey Ali
Turkyilmaz Department of Industrial Engineering, Fatih University, Istanbul, Turkey . 2014. Performance
assessment of manufacturing SMEs: a frontier approach. Industrial Management & Data Systems 114:5,
797-816. [Abstract] [Full Text] [PDF]