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key performance indicators (KPIs)

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Essam Salah
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26 views4 pages

key performance indicators (KPIs)

Uploaded by

Essam Salah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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In the commercial airline industry, key performance indicators (KPIs) help measure

operational efficiency, financial performance, and customer satisfaction. While specific


metrics vary across airlines and regions, here are some of the most commonly tracked
and important KPIs:

1. On-Time Performance (OTP)

 Definition: The percentage of flights departing or arriving within a certain


threshold of their scheduled time (often 15 minutes).
 Why it matters:
o Directly impacts customer satisfaction.
o Tied to airline reputation and competitiveness.
o Affects operational efficiency and crew utilization.

2. Load Factor (LF)

 Definition: The percentage of available seats filled with paying passengers.


Mathematically:
Load Factor=Revenue Passenger Kilometers (RPK)Available Seat Kilometers (A
SK)×100\text{Load Factor} = \frac{\text{Revenue Passenger Kilometers
(RPK)}}{\text{Available Seat Kilometers (ASK)}} \times 100 or as a simpler
ratio: Load Factor=Revenue PassengersSeats Available\text{Load Factor} = \
frac{\text{Revenue Passengers}}{\text{Seats Available}}
 Why it matters:
o Shows how effectively the airline is filling its seats (capacity utilization).
o Strong indicator of profitability, as higher load factor generally increases
revenue and spreads operating costs over more passengers.

3. Yield or Revenue per Revenue Passenger Kilometer (Yield/RPK)

 Definition: Average fare per passenger per kilometer (or mile). Mathematically:
Yield=Passenger RevenueRPK\text{Yield} = \frac{\text{Passenger Revenue}}{\
text{RPK}}
 Why it matters:
o Measures how much revenue the airline generates per paying passenger
for each kilometer flown.
o A major indicator of pricing strategy and market conditions.
4. Revenue per Available Seat Mile/Kilometer (RASM/RASK)

 Definition: Total operating revenue per available seat mile (ASM) or available
seat kilometer (ASK). Mathematically: RASM=Total Operating RevenueASM\
text{RASM} = \frac{\text{Total Operating Revenue}}{\text{ASM}}
 Why it matters:
o Shows how well the airline generates revenue relative to its capacity (i.e.,
how well it sells the seats and captures ancillary revenues).
o A higher RASM generally indicates better revenue performance.

5. Cost per Available Seat Mile/Kilometer (CASM/CASK)

 Definition: Total operating costs per available seat mile (ASM) or available seat
kilometer (ASK). Mathematically: CASM=Total Operating CostASM\
text{CASM} = \frac{\text{Total Operating Cost}}{\text{ASM}}
 Why it matters:
o Core efficiency metric for airlines, showing how much it costs to operate
each seat-mile/kilometer.
o Lower CASM typically means better operational and cost efficiency.

6. Ancillary Revenue

 Definition: Additional revenue generated from non-ticket sources (baggage fees,


seat upgrades, loyalty program partnerships, onboard sales, etc.).
 Why it matters:
o Allows airlines to diversify income streams and enhance overall
profitability.
o Provides more flexibility in competitive pricing since base fares can be
kept lower while recouping extra income through add-ons.

7. Net Promoter Score (NPS) / Customer Satisfaction Metrics

 Definition: Measures customer satisfaction and the likelihood of passengers


recommending the airline to others.
 Why it matters:
o Strong indicator of customer loyalty, which affects market share and
repeat business.
o Helps identify areas for service improvement (e.g., in-flight experience,
ground services, baggage handling, etc.).
8. Safety and Compliance Metrics

 Definition: Metrics related to the number of incidents, accidents, compliance with


regulatory requirements, and overall safety performance.
 Why it matters:
o Safety is paramount in the airline industry. High safety standards protect
reputation and avoid legal liabilities.
o Vital for building customer trust and maintaining regulatory approval.

9. Employee Productivity and Engagement

 Definition: Indicators such as revenue per employee, flight hours per crew
member, employee satisfaction survey scores, and turnover rates.
 Why it matters:
o Engaged employees tend to provide better customer service, boosting
satisfaction and efficiency.
o Helps airlines track overhead costs and optimize staffing.

10. Fuel Efficiency / Fuel Burn per Passenger

 Definition: Measurement of how many liters or gallons of fuel are used per
passenger-mile/kilometer flown.
 Why it matters:
o Fuel is one of the highest operating costs for airlines.
o Environmental sustainability and cost control are increasingly important
for stakeholders.

11. Market Share and Route Profitability

 Definition: The percentage of total passengers or flights an airline carries in a


particular market or route network.
 Why it matters:
o Indicates competitive positioning.
o Highlights which routes or markets are profitable and which may need
additional attention or reconfiguration.
Putting it All Together
Airlines typically monitor a combination of the above KPIs to balance financial health
(e.g., revenue, costs), operational excellence (e.g., on-time performance), and customer
satisfaction (e.g., NPS). By focusing on these KPIs, commercial airliners can make data-
driven decisions about fleet management, route planning, pricing strategies, and service
improvements—all critical in a highly competitive and cost-sensitive industry.

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