Table 3: Key Success Factors for Eight U.S. Airlines

Table 3: Key Success Factors for Eight U.S. 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.
2. Promotion Effectiveness – revenue passenger miles [10, T-2] per promotion dollar [10, P-12] – rpms/promo$ – Higher is better from airline perspective.
3. Aircraft Utilization – aircraft hours [10, T-2] per aircraft day [10, T-2] – hours/day – Higher is better from airline perspective.
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.
5. Employee Productivity – available seat miles [10, T-2] per employee [11] – asms/employee – Higher is better from airline perspective.
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.
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.
8. Operating Costs – total operating costs [10, P-12] per available seat mile [10, T-2] – cents/asm – Lower is better from airline perspective.
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).
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].
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.)
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.

**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.

Author of the article
Richard M. McCabe, PhD
Richard M. McCabe, PhD,

, has been an adjunct (now “supporting”) faculty member in Strategy at the Graziadio School of Business and Management since 1995. He has also taught organization theory and design at GSBM, and strategy and human resources management courses at three other universities in Southern California. Dr. McCabe previously worked as an engineer and manager in the shipbuilding and aircraft manufacturing industries, as a pilot in the U.S. Air Force, and as a consultant in the aircraft manufacturing, chemical manufacturing, and healthcare industries. Dr. McCabe’s research interests are in strategy design and strategy implementation in transportation industries.

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