Author(s)

E. Fernandes, H. M. Pires, M. P. E. Lins & A. C. M. Silva

Abstract

This paper studies the financial performance of public air transport companies. Data envelopment analysis (DEA) is applied to three dimensions: financial variables related to capital structure (financial leverage) as input, and firm size and tangible assets as outputs. A discussion between the classical DEA method of variable return of scale and the Russel efficiency is developed in cases where the decision making unit (DMU) lies in non-Pareto-efficient space. The paper shows the method managers may follow to correct the performance index of the DMU, so they may make better decisions about the path to the efficiency frontier, using both approaches, and considering the minimization of inputs and the maximization of outputs. Keywords: data envelopment analysis, financial performance, air transport companies. 1 Introduction Data envelopment analysis (DEA) is a non-parametric method aimed at measuring the performance of firms, organizations, programs, i.e., the performance of business units under analysis, which are usually called decision making units (DMU). The procedure involves a mathematical technique based on linear programming, which does not need the functional form relating inputs and outputs to be specified. This way, DEA is not proposed to format a

Keywords

data envelopment analysis, financial performance, air transport companies.