Key Performance Indicator (KPI)
Key Performance Indicators (KPIs) are quantifiable metrics used to track and measure the performance of an organization's operations, safety, and efficiency. In aviation, KPIs play a crucial role in identifying areas for improvement and ensuring alignment with strategic goals and safety standards.
What KPIs Are and Why They Matter
Quantifiable Metrics
KPIs are data-driven and provide a clear picture of performance.
Performance Tracking
They help monitor progress towards specific objectives and identify areas where performance needs improvement.
Safety Management
In aviation, KPIs are crucial for evaluating the effectiveness of Safety Management Systems (SMS) and ensuring safety standards are met.
Operational Efficiency
KPIs can also track operational efficiency, such as flight utilization, on-time performance, and fuel consumption.
Financial Performance
KPIs can also be used to track financial performance, such as revenue per passenger kilometer (RPK).
Industry-Specific and Organization-Specific
While some KPIs are common across the industry, each organization should tailor its KPIs to its specific goals and objectives.
KPI Categories in the Airline Industry
(Source: Visible Alpha)
Capacity Metrics
- Available Seat Miles (ASM): Number of seats available multiplied by distance flown.
- Available Seat Kilometers (ASK): ASM in metric units.
Revenue Metrics
- Revenue Passenger Miles (RPM): Number of paying passengers multiplied by miles flown.
- Revenue per Available Seat Mile (RASM): Total revenue divided by ASM.
- Passenger Revenue per ASM (PRASM): Passenger revenue divided by ASM.
Cost & Efficiency Metrics
- Cost per Available Seat Mile (CASM): Operating expenses divided by ASM.
- CASM-Ex Fuel (CASM-Ex): CASM excluding fuel costs.
- EBITDAR: Earnings before interest, taxes, depreciation, amortization, and rent or restructuring costs.
Utilization & Load
- Load Factor: RPM divided by ASM, expressed as a percentage.
- Passenger Yield: Revenue divided by RPM (also calculated per kilometer).
Composite Revenue Metrics
- Total Revenue per ASM (TRASM): Total revenue divided by ASM.
- Total Revenue per Kilometer (TRASK): Total revenue divided by ASK.
Use of KPIs in Investment Analysis
KPIs provide a standardized approach for comparing the performance of airline companies. Analysts and investors use KPIs to evaluate trends, forecast outcomes, and benchmark one airline against another, regardless of differences in size, structure, or reporting methods.
Visible Alpha provides industry-standardized KPI datasets for dozens of airlines including:
- American Airlines, Delta, Southwest, United
- Air France–KLM, Ryanair, Lufthansa
- Singapore Airlines, Cathay Pacific, Japan Airlines, and more
