A preview of the PDF is not available
Conference PaperPDF Available
Choosing financial Key Performance Indicators: the Airline Industry case
Abstract and Figures
Selecting relevant Key Performance Indicators (KPIs) involves an assessment of both cost-and revenue-driven measures. Cost driven allocation usually predominates, due primarily to a traditional accounting mindset coupled with the need for cost savings in the current eco-nomic environment. Using data from the airline industry in all of the major markets in the world, this paper demonstrates that revenue-or profit-driven KPIs, consistently applied, will likely lead to bet-ter financial performance than "flying" the business based on cost-driven metrics or those, representing a mixture of revenue target and cost-driven metric. Specifically it examines the effectiveness of models that characterize performance based on two performance indicators in particular – seats and passenger-kilometers. We document strong evidence indicating that Operating Profit per Passenger or per Pas-senger-Kilometer is the most significant variable when it comes to explaining the variation in airline profitability, arriving at the conclusion that despite the traditional belief that measuring per seat is only appropriate for point-to-point destination services typically provided by Low Cost Carriers, the same model also fits Full Service Network Carriers and, thus, can be used by them as a meaningful tool for financial targeting and strategic decision-making. Acknowledgements This paper would be incomplete if it did not contain the fullest expression of my gratitude to Professor Dr. Hany Shawky, who has so generously given of his time and expertise; and not only with this paper but throughout my PhD project. He has prompted and men-tored my attempts to achieve a level of excellence with an open and gentle manner that created an environment for ideas to bear fruit and for me to believe in my own potential. His contribution has been invaluable and I thank him most sincerely! 2
Figures - uploaded by Ganna Demydyuk
All figure content in this area was uploaded by Ganna Demydyuk
Content may be subject to copyright.