Airline Industry has always been a growth oriented and highly challenging sector. In addition to providing air transport facilities to the passengers it also engages in delivery of cargo to domestic and international destinations.
It has a direct bearing on the economic growth of the country by encouraging international trade and tourism. In recent times the airline industry has undergone tremendous and radical changes due to multiple factors like airline bankruptcy, increased competition, operating costs, etc. Evaluating the performance of companies in this sector under such circumstances is a complex task.
Key Performance Indicators(KPIs) can play a major in devising an objective procedute for evaluating the performance of the airline industry. Essentially KPIs are financial and non-financial factors and that can be examined to evaluate the performance of a business unit. In airline industry also several KPIs can be measured to improve the effectiveness and efficiency of the business. These KPIs are broadly categorized in four perspectives- Financial Perspective (includes KPIs like Revenues, Expenses, Profits and Fuel costs), Customer Perspective (consist of KPIs such as Types of cuisine offered, Baggage rates, Response time for queries, Cancelled Flights), Flight Operations (comprised of Number of flights, Passengers, Available flying time, Aircraft utilization), and Service Indicator (includes Passenger seats occupied, Number of accidents, Freight and mail, Number of partners in supply chain).
Effective evaluation of these KPIs facilitates a business unit to identify those critical areas of concern that are lagging behind in contrast to organizational goals. Financial indicators aim at improving revenues and profits and decreasing the expenses and fuel costs. Customer indicators indicate those factors that aid in improving the satisfaction level of the customers. Flight operations target the operational aspect of the business and Service indicators talks about the various services offered by the airlines and provide clues to improve the service base.
As in the case of other industries, airline industry is also dynamic in nature and full of challenges. The various key challenges faced by the business in the airline industry are-rising fuel costs that drastically imbalance the revenue and expenditure equilibrium. In addition airlines need to deal with is passenger's security and safety issues have gained momentum since 9/11. These apart Government regulations are always a great area of concern for the airline business. Along with major challenges there are various regular challenges the industry has to deal with range from customer loyalty to shortage of pilots in number of regions.
The deregulation policies of the government and intense and cut-throat competition prevailing in the industry have compelled the airline businesses to reduce air fares and cut costs. A business which wishes to secure a competitively and operationally strong position in the market must cater to the challenges and opportunities in its environment in which KPIs can serve key means. Companies need to evolve their own customized KPIs which they can use to remain abreast of their environment.