Using Operational and Stock Analytics to Measure Airline Performance: A Network DEA Approach

ABSTRACT The majority of extant studies that focus on performance and efficiency benchmarking of firms utilize only operational measures while neglecting to integrate stock market indicators in their methodological frameworks. Such an approach may lead to erroneous or biased conclusions given that operational and stock measures serve to capture different dimensions and attributes of an overall firm's activities, health, and prospects. Thus, we build and implement a two‐stage network data envelopment analysis process that utilizes both operational and stock market indicators in order to evaluate the performance of nine major international airline companies from 2006 until 2016. In our analysis, we show that there is heterogeneity in the performance of all airlines across time. Most notably, during the 2013–2014 European debt crisis and U.S. debt‐ceiling crisis, we find that stock market‐based performance scores declined significantly for all our sampled companies. We also show that while low cost carriers generally maintain higher operational‐based performance scores than their full service counterparts, full service carriers earn higher performance scores based on stock market indicators. This finding lends support to our approach and our general premise that argues that performance evaluation methods can yield more comprehensive conclusions if both operational and stock market indicators are utilized.