Measuring production and consumption efficiencies using the slack‐based measure network data envelopment analysis approach: the case of low‐cost carriers

One of the most important outcomes of the deregulation of air transportation policy is the emergence of low‐cost carriers (LCCs) around the world. Although LCC airlines have been in operation for more than 30 years, not every LCC is successful. In order to reduce the inefficiencies of LCCs, this paper measures the performance of LCCs by using slack‐based measure network data envelopment analysis. This model combines both the production process with input orientation and the consumption process with output orientation into a unified model. Furthermore, envelopment map analysis LCCs are performed to determine the reasons for the LCCs' inefficiency and how improvements can be made. A sample of 16 low‐cost airlines from Europe, the USA, and Asia were selected for operational performance analysis. The results show that the main reason for easyJet's, US Airways', and Virgin Blue's inefficiency is production inefficiency, so these LCCs should reduce their input quantities to increase efficiency. Jet2, Aer Lingus, and JetBlue were, by contrast, found to be consumption inefficient; these LCCs should increase their output quantities in order to enhance performance. Copyright © 2012 John Wiley & Sons, Ltd.