Key Performance Indicators: Your Airline's Best Friend

A Key Performance Indicator (KPI) is a quantifiable metric used to evaluate and measure the performance, effectiveness, or success of an organization, a specific process, department, or individual activities. KPIs are typically defined based on the airline's objectives and goals and are used to track, analyze, and assess performance over time. However, KPIs can also be used as metrics to measure progress towards achieving goals and objectives, whether strategically or during the course of a project.

Performance Assessment

KPIs are used to measure the performance of specific processes, functions, or activities within an organization. For example, “Aircraft Turnaround Time” is used to quantify the time taken to prepare and turn around an aircraft between flights, or “Customer Satisfaction Score” is used to measure the average customer satisfaction rating based on surveys.

KPIs usually target specific processes, departments, or functions to track and monitor their performance.

A Performance Trigger is a predetermined threshold or criteria value that prompts an evaluation, decision-making process, adjustment, or corrective action linked to a particular KPI. Activation of a KPI trigger does not inherently indicate that issues have materialized but functions as an alert to indicate that performance has surpassed an established limit. The purpose of a trigger is to capture the attention of managers and employees involved in decision-making processes to determine if corrective measures are required under the current conditions.

Objectives and Key Results (OKRs)

OKRs are targets used by organizations to define and track their goals and objectives and their outcomes. For example, for the objective “Enhance Operational Efficiency”, the key result “Reduce flight turnaround time by 15% to improve on-time performance”, or for the objective “Improve Passenger Experience”, the key result “Achieve a passenger satisfaction rating of 90% or higher in customer surveys”.

KPIs are often a natural component of OKRs, but not the opposite. It means that KPIs can be used as metrics to measure the progress and success of objectives.

The Lean Airline KPI Classification

The following KPI classification allows to assess and manage performance at various levels of the organization.

• Strategic KPIs serve to monitor performance and progress towards long-term goals. These are more closely aligned with Objectives and Key Results (OKRs) indicators to track progress toward specific objectives, as they are typically associated with achieving long-term goals.

• Operational KPIs, on the other hand, concentrate on the performance of day-to-day activities and the efficiency of processes, like on-time departures or aircraft turnaround times. KPIs can be further classified according to the specific interests and priorities of the airline.

Given the inherent Safety priority of the airline business, the purpose of any business, Profitability, and the focus on Lean methodologies, KPIs can be further categorized as:

• Safety KPIs (SPIs) prioritize the well-being of passengers and employees by tracking key Safety metrics and ensuring compliance with aviation regulations.

• Financial KPIs (FPIs) focus on the economic performance and sustainability of the airline. They encompass a range of financial metrics, such as revenue, expenses, and profits that help to assess its financial health.

• Lean KPIs (L-KPIs) are dedicated to efficiency, waste reduction, and continuous improvement. They provide insights into how well Lean principles are integrated into various aspects of airline operations, identifying opportunities for streamlining processes, reducing operational entropy, and enhancing overall efficiency.

Any airline is challenged between profitability and Safety. It means that the business must generate profit while considering the associated costs of implementing Safety risk controls (technology, training, processes,and procedures). Compromising Safety risk controls resources may end up making the airline activity unprofitable, risking its sustainability. So, in the same way that Financial Performance Indicators (FPIs) help the airline to recognize financial advantages and difficulties, Safety Performance Indicators (SPIs) are used to monitor Safety performance. Monitoring both types of KPIs facilitates carefully managing resource allocation and balancing profitability and Safety. Introducing Lean Key Performance Indicators (L-KPIs), designed to identify and eliminate inefficiencies and waste within processes, enhance this perspective and potentially lead to improvements in both financial and Safety outcomes.

The SMART Framework

The SMART framework is widely used in various contexts, including setting goals and objectives and performance measurement. Whether KPIs are purely performance indicators (with triggers to initiate assessment but without specific target values) or OKRs to meet objectives (with specific target values), strategic or operational, or focus on different areas, the SMART framework can be used to ensure they are well-defined, meaningful, and provide valuable insights.

Let's have a look into each SMART element:

• Specific: KPIs should be clear and precise, leaving no room for ambiguity. They should answer the 6Ws questions: who is responsible, what is being measured, where it applies, when it is measured and assessed, why it matters, and how it will be measured. Specific KPIs establish the precise aspect of performance under evaluation.

• Measurable: KPIs must be quantifiable to enable effective tracking and assessment of performance. When used as performance targets, they should allow to measure progress and determine when these have been achieved.

• Achievable: The measurement of KPIs should be realistic and achievable, given the available resources and constraints. When used as performance targets, these should also be realistic and attainable with the efforts and means at hand to ensure they can drive progress or, when necessary, trigger the allocation of additional resources.

• Relevant: KPIs should align with the organization's objectives and have a clear purpose. This component ensures that they are meaningful and significant to the organization.

• Time-bound: KPIs should have defined periods for measurement and assessment. It ensures that performance is consistently tracked and assessed over time. When used as performance targets, they should have a specific timeframe for completion.

The SMART criteria serve as a valuable guide to set well defined metrics that are aligned with the goals and objectives of the airline, promoting clarity, accountability, and continuous improvement, which are fundamental aspects of the Lean methodology.

Conclusion

Key Performance Indicators (KPIs) are essential tools for airlines to monitor and improve their performance across safety, operations, and financial outcomes. By leveraging the SMART framework, airlines can ensure their KPIs are aligned with strategic objectives and drive continuous improvement.

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