Enhancing Global Competitiveness: Benchmarking Airline Operational Performance in Highly Regulated Environments

Enhancing competitiveness in the global airline industry is at the forefront of attention with airlines, government, and the flying public. The seemingly unchecked growth of major airline alliances is heralded as an enhancement to global competition. However, like many mega-conglomerates, mega-airlines will face complications driven by size regardless of the many recitations of enhanced efficiency. Outlined herein is a conceptual model to serve as a decision tool for policy-makers, managers, and consumers of airline services. This model is developed using public data for the United States (U.S.) major airline industry available from the U/S. Department of Transportation, Federal Aviation Administration, the National Aeronautics and Space Administration, the National Transportation Safety Board, and other public and private sector sources. Data points include number of accidents, pilot deviations, operational performance indicators, flight problems, and other factors. Data from these sources provide opportunity to develop a model based on a complex dot product equation of two vectors. A row vector is weighted for importance by a key informant panel of government, industry, and consumer experts, while a column vector is established with the factor value. The resulting equation, known as the national Airline Quality Rating (AQR), where Q is quality, C is weight, and V is the value of the variables, is stated Q=C[i1-19] x V[i1-19]. Looking at historical patterns of AQR results provides the basis for establishment of an industry benchmark for the purpose of enhancing airline operational performance. A 7 year average of overall operational performance provides the resulting benchmark indicator. Applications from this example can be applied to the many competitive environments of the global industry and assist policy-makers faced with rapidly changing regulatory challenges.