The purpose of this study is to estimate the operating cost excess and its components for Iran Air Company using a new non-radial inefficiency measurement method. To this end a dataset of flights for 10 domestic routes over the period 2006-2008 were utilized. The findings of this study show that there is a considerable potential operating cost saving for Iran Air Company over the sampled aircraft-routes. Considering each input excesses separately provides more evidence of such a potential improvement. The results indicate that the largest cost saving for inefficient aircraft-routes can be achieved by using fuel, labor and maintenance more efficiently. Overall, and on average, fuel, labor and maintenance costs are the main sources of the weak performance for Iran Air Company by the relative costs excesses of 56%, 48% and 40%, respectively. More precisely, for Iran Air optimizing fuel consumption, labor and maintenance costs should have the high priorities in the path of performance improvement.
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