| Table 3: Key Success Factors for Eight U.S. Airlines | ||||||||
|---|---|---|---|---|---|---|---|---|
Airlines | American Airlines | America West Airlines | Continental Airlines | Delta Air Lines | Northwest Airlines | Southwest Airlines | United Airlines | US Airways |
| 1. Attractiveness – passenger revenue [10, P-12] per revenue passenger mile [10, T-2] – cents/rpm – a normalized measure of ticket price per seat – Lower is better from passenger viewpoint. | ||||||||
| 2004 | 11.5 | 9.4 | 11.2 | 11.0 | 11.5 | 11.4 | 10.4 | 12.5 |
| 2005 | 12.0 | 10.3 | 11.6 | 11.0 | 11.6 | 11.8 | 10.9 | 12.6 |
| Scale | 4 | 1 | 3 | 2 | 3 | 3 | 2 | 4 |
| 2. Promotion Effectiveness – revenue passenger miles [10, T-2] per promotion dollar [10, P-12] – rpms/promo$ – Higher is better from airline perspective. | ||||||||
| 2004 | 81 | 144 | 109 | 81 | 67 | 92 | 75 | 68 |
| 2005 | 86 | 134 | 95 | 85 | 71 | 101 | 82 | 69 |
| Scale | 3 | 1 | 1 | 3 | 5 | 1 | 4 | 5 |
| 3. Aircraft Utilization – aircraft hours [10, T-2] per aircraft day [10, T-2] – hours/day – Higher is better from airline perspective. | ||||||||
| 2004 | 8.9 | 9.4 | 8.5 | 10.4 | 7.4 | 9.3 | 9.0 | 7.9 |
| 2005 | 8.6 | 9.3 | 9.1 | 10.4 | 7.5 | 9.6 | 9.5 | 8.1 |
| Scale | 4 | 2 | 3 | 1 | 5 | 2 | 2 | 5 |
| 4. Relative Load Factor – revenue passenger miles [10, T-2] per available seat mile [10, T-2] divided by the average load factor of the eight airlines – Higher is better from airline point of view. | ||||||||
| 2004 | 0.98 | 1.01 | 1.02 | 0.99 | 1.05 | 0.91 | 1.04 | 0.98 |
| 2005 | 1.00 | 1.02 | 1.02 | 0.99 | 1.05 | 0.90 | 1.04 | 0.96 |
| Scale | 3 | 3 | 3 | 3 | 2 | 4 | 2 | 4 |
| 5. Employee Productivity – available seat miles [10, T-2] per employee [11] – asms/employee – Higher is better from airline perspective. | ||||||||
| 2004 | 556 | 674 | 618 | 563 | 594 | 603 | 624 | 525 |
| 2005 | 579 | 658 | 665 | 623 | 641 | 684 | 628 | 589 |
| Scale | 4 | 2 | 2 | 3 | 3 | 2 | 3 | 4 |
| 6. Employee Morale – sum of lost bags per 1000 passengers and complaints per 100,000 passengers [12] – Lower is better from both customer and airline perspectives. | ||||||||
| 2004 | 5.61 | 5.00 | 4.40 | 5.96 | 5.11 | 3.53 | 4.82 | 6.54 |
| 2005 | 6.94 | 5.29 | 5.04 | 8.18 | 5.80 | 4.43 | 5.30 | 11.48 |
| Scale | 4 | 1 | 1 | 5 | 2 | 1 | 1 | 5 |
| 7. Operating Revenue – total operating revenue [10, P-12] per available seat mile [10, T-2] – cents/asm – relative to average of these eight airlines – Higher is better from airline perspective. | ||||||||
| 2004 | 0.97 | 0.75 | 1.06 | 1.06 | 1.12 | 0.77 | 0.98 | 1.19 |
| 2005 | 0.98 | 0.93 | 1.08 | 1.00 | 1.12 | 0.74 | 1.03 | 1.13 |
| Scale | 3 | 5 | 2 | 3 | 1 | 5 | 3 | 1 |
| 8. Operating Costs – total operating costs [10, P-12] per available seat mile [10, T-2] – cents/asm – Lower is better from airline perspective. | ||||||||
| 2004 | 10.9 | 8.2 | 12.0 | 12.9 | 12.8 | 7.8 | 11.6 | 13.7 |
| 2005 | 11.9 | 11.5 | 13.1 | 12.9 | 14.4 | 7.9 | 12.5 | 13.9 |
| Scale | 3 | 2 | 4 | 4 | 5 | 1 | 3 | 5 |
| 9. Operating Margin – total operating revenue [10, P-12] per available seat mile [10, T-2] less total operating cost [10, P-12] per available seat mile [10, T-2] – cents/asm – Higher is better from airline perspective; negative margin is poor or scale (5), 0 to 0.3 cents/asm is below average (4), 0.3 to 0.6 cents/asm is average (3), 0.6 to 1.0 cents per asm is above average (2), and greater than 1.0 cent per asm is good (1). | ||||||||
| 2004 | (0.24) | (0.01) | (0.35) | (1.24) | (0.47) | 0.72 | (0.80) | (0.64) |
| 2005 | (0.20) | (0.40) | (0.11) | (0.90) | (0.97) | 0.96 | (0.17) | (0.40) |
| Scale | 5 | 5 | 5 | 5 | 5 | 2 | 5 | 5 |
| 10. Relative Growth Rate – available seat miles [10, T-2] current period divided by available seat miles comparable period year earlier – Higher is better from an airline perspective up to a point; negative growth is poor (5), 0 to 3% is below average (4), 3% to 6% is average (3), 6% to 8% is above average (2), 8% to 10% is good (5), but over 10% is too aggressive (2 or higher) based on our earlier work [5]. | ||||||||
| 2004 | 1.05 | 1.08 | 1.07 | 1.08 | 1.03 | 1.07 | 1.06 | 1.05 |
| 2005 | 1.01 | 1.01 | 1.05 | 1.03 | 1.00 | 1.11 | 0.97 | 0.99 |
| Scale | 4 | 3 | 3 | 3 | 4 | 1 | 4 | 4 |
| 11. Equity Growth – total equity current period [10, B-1] less total equity earlier period – end 2004 less end 2003 and end 2005 less end 2004 – $billions – Higher is better from an investor’s (and therefore an airline’s) perspective – Negative equity is poor, over 10% growth is good. (Southwest’s (WN’s) total equity grew 10.7% in 2004 and nearly 20% in 2005). (US Airways had negative equity at the end of 2005, but less so than for 2004.) | ||||||||
| 2004 | (0.45) | (0.07) | (0.53) | (3.48) | (1.00) | 0.54 | (2.04) | (0.59) |
| 2005 | (1.07) | (0.40) | (0.04) | (7.83) | (2.31) | 1.08 | (18.05) | 0.37 |
| Scale | 5 | 5 | 5 | 5 | 5 | 1 | 5 | 5 |
| 12. Debt to Total Assets – long-term debt [10, B-1] divided by total assets [10, B-1] at end of period – A reasonably low ratio is preferred by most investors (and therefore by an airline) – In rank order of the four airlines with valid data, 1 is best. | ||||||||
| 2004 | 0.34 | 0.37 | 0.47 | 0.49 | 0.38 | 0.15 | 0.35 | 0.27 |
| 2005 | 0.34 | 0.43 | 0.43 | 0.36 | 0.06 | 0.09 | 0.40 | 0.38 |
| Scale | 2 | 3 | 4 | n/c** | n/c** | 1 | n/c** | n/c** |
**Note: For key success factor 12, “n/c” means that calculated values for these airlines are “not comparable” with the values for the other airlines. These airlines have been involved in Chapter 11 bankruptcy proceedings during these periods and have shed debt and assets in abrupt manners.
