Target setting for airlines: A DEA bargaining approach with network structure

Abstract The objective of this study is to find out how airlines can reduce their inputs and provide appropriate passenger and cargo capacity, thereby increasing passenger and cargo traffic and reducing CO 2 emissions. A network data envelopment analysis (DEA)–based Nash bargaining model is developed incorporating intermediate products and weakly disposable undesirable outputs and is applied to a dataset of 33 airline companies to obtain the bargaining solution. According to the results, airlines that are weak efficient or inefficient could establish their targets to attain efficiency through a fair and logical negotiation among the inputs, intermediate products, good outputs and bad output. Appropriate policies need to be implemented that would improve the airlines’ performance in terms of improvement in not only the efficiency of inputs and desirable outputs along with intermediate products but also with regard to environmental performance. This would ensure sustainable growth in airlines’ performance.