From European to Asian leadership in the economic efficiency of the world air industry

Abstract

This article sets out to compare the economic efficiency (EE) and decomposing of the changes in productivity of international air transport companies, during the period of 1996–2000. In these years, competition has been increased with the low-cost carriers and changes in Asian markets. Our purpose is to prove if these kinds of changes have damaged the EE of European and American companies compared with Asian carriers, and if Asian carriers are the new leaders in the air transport market. A stochastic frontier is estimated for cost function. From these estimations, we obtain indices for EE. For measuring productivity change, we use Malmquist indexes. They are computed using nonparametric programming techniques and we decompose them into technical and efficiency change. Our evidence suggests that the benefits of increasing competition in terms of EE and productivity are large for the Asian companies.