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Monitoring airline performance

Published online by Cambridge University Press:  04 July 2016

Roy J. Pearson
Roy J. Pearson*
Affiliation:
University of Liverpool
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Extract

There are two methodological approaches by which airline efficiency might be measured. One way is by using the concept of comparative airline efficiency. Using this concept, efficiency is measured with respect to typical, mean, or expected industrial average performances. The approach adopted in this paper is to measure airline efficiency by using the concept of monitored airline performances. In this kind of exercise efficiency is measured with respect to the airline's stated objectives. In using the. monitoring approach a consideration of general airline objectives is required. Typical airline objectives are discussed below, as are the expected repercussions on efficiency parameters. After discussing objectives in general, British Airways’ corporate objectives will be discussed in particular. Finally, whether British Airways has been successful or not in reaching its objectives will be investigated. But as a prerequisite to this investigation some discussion will be necessary of the most appropriate indicators to use for monitoring the objectives.

Information

Type
Research Article
Information
The Aeronautical Journal , Volume 82 , Issue 806 , February 1978 , pp. 64 - 74
Copyright
Copyright © Royal Aeronautical Society 1978 

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Footnotes

*

Formerly Senior Research Fellow, Transport Studies Group, Polytechnic of Central London.

References

1. See for example Chapter IV of British Caledonian Airways’ submission to the CAA's European Air Fares Consultation. January 1977.Google Scholar
2. 1972/73 Report and Accounts, British Airways.Google Scholar
3. 1973/74 Annual Report and Accounts, British Airways.Google Scholar
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5. British Airways Annual Report and Accounts, 1975/76, p 9.Google Scholar
6. Op. cit. ‘British Airways: The Merger of BEA and BOAC, p 12.Google Scholar
7. See for example various articles on safety in Flight International, e.g. 28th November 1974, 28th August 1975, 24th January 1976.Google Scholar
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19. The adoption of replacement cost accounting, as opposed to historical cost accounting, would significantly worsen an airline's financial operating results, due principally because of the increased charge for amortisation and depreciation. The results for BA in 1975/76 under the two different systems would have been as follows: Google Scholar
20. 1975/76 Annual Report and Accounts, British Airways.Google Scholar
21. The Treasury has stipulated that for the period 1975/76 to 1978/79 BA should aim to achieve a return on mean net assets of 11%. BA's internal financial objectives, based on replacement cost accounting, are higher than this figure. (Oral evidence given to the European Air Fares Consultation, London 1977.)Google Scholar
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23. Profits in the rate of return on mean net assets measure are calculated before the deduction of interest and tax. Excluding 1973/74, BA last achieved the financial objective in 1969/70.Google Scholar
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