Air Arabia Company: Performance Management
OLHR 8096 - Performance Management
University of Cincinnati
Introduction
Performance management plays a pivotal role in the success of any company. The primary goal
of performance management and its related set of activities is to guarantee that the
organizational objectives are consistent with the business strategy (Cardy & Leonard 2014).
Because performance management is so important, the selected actions receive a high degree
of evaluation and scrutiny (Cardy & Leonard 2014). In this case, Air Arabia is one company
that employs a performance management system to measure its success. The air carrier operates
in the Middle East and positions itself as a low-cost service provider (Arabia.com 2016).
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
Air Arabia highly relies on financial measures to assess the company’s productivity, but it is
questionable whether following this key performance indicator (KPI) scheme will have a
positive effect on Air Arabia’s future revenue. The debatable nature of this strategy is the
primary driver for this research. Moreover, because the airline segment has not been profoundly
examined in terms of performance management, this study will offer novel insights to this field.
The primary goals of this paper are to provide an analysis of Air Arabia’s current performance
management system and to identify key strategic issues that the air carrier faces. The research
questions and literature review were formulated in such a way as to explore these concepts
from a theoretical perspective, and the methodology and data analysis are presented
accordingly. Based on the research, this paper also offers a critical discussion of Air Arabia’s
performance management strategy and concludes with several recommendations to improve
the air carrier’s existing performance management system.
As mentioned above, Air Arabia prioritizes numerical and financial KPIs to measure its
progress (Air Arabia 2015). This strategy reflects a lack of assessment in other spheres and
might be considered a potential threat to the air carrier in the future. As such, the primary aim
of this report is to determine the relative importance of non-quantitative and non-financial
performance indicators for profitability and success in the airline industry.
Indeed, one of the objectives of the report is to reveal that applying only financial KPIs is not
adequate for a company to effectively track its progress. The report aims to use the example of
Air Arabia to highlight the importance of customer loyalty and human resource management
(HRM) practices. The research questions are: Is it appropriate to use a traditional performance
system within the context of the airline industry? Could the prioritization of financial KPIs
have a beneficial impact on the financial performance and organizational development of the
company?
Understanding the pivotal role of KPIs and their connection with performance management are
critical for this study. Nowadays, performance management is a complex instrument that
encompasses various spheres and ensures the effectiveness of different functional units within
the organization (Cardy & Leonard 2014). It is apparent that this business area has a high
correlation with the company’s strategy, which informs the choice of KPIs and assists in their
increased effectiveness (Cardy & Leonard 2014).
Businesses actively use various types of KPIs to evaluate their productivity levels and measure
their progress toward achieving their strategic objectives (Parmenter 2007). The indicators tend
to be periodical and repeated in nature and pertain to measuring the efficiency of different
business processes such as production and marketing (Parmenter 2007). The principal intention
of these tools is to monitor company progress and highlight the specific spheres that require
improvement.
Originally, financial and numerical performance indicators were considered to be the main
priority because these measurements reflected the economic functioning of the company
(Bussin 2012). Namely, these instruments were used as a basis for the development of the
traditional performance management system. Nonetheless, this theoretical framework was
quickly deemed inadequate, as the evaluations focused too much on internal factors (Bussin
2012). Companies realized that it was also extremely critical to pay attention to externalities
such as customer loyalty and satisfaction, perceived quality, and development of the network,
as all of these factors generate a substantial share of revenue.
Accepting the crucial importance of these other spheres in business caused the existing KPI
framework to evolve and expand in terms of functionality, despite the fact that well-defined
principles of traditional performance management were disregarded. In this case, one of the
primary aspects that differentiates the new approach from the traditional framework is its
flexibility (Demartini 2013). This novelty is reflected in the capability to modify KPIs easily,
adding greater autonomy to the decision-making process.
It could be said that the new strategy implies a high level of control and coordination and
supports “innovative initiatives” (Demartini 2013, p. 4). Nonetheless, the traditional KPI
scheme is still actively employed in many businesses, as the managerial teams may not have
enough ingenuity and self-reliance to “replace it with a vibrant and sophisticated system that
endures” (Chandler 2016, p. 5).
As for small and medium enterprises (SMEs), financial measures are often prioritized in
organizations, as they help control the company’s performance in the market (Bussin 2012).
However, the view of employees as a pivotal asset of the company is a trend that has currently
been gaining popularity (Luyckx 2015). Along with PPIs (Process Performance Indicators),
KPIs are used to measure employee productivity and assist the company in the optimization of
employee performance (Luyckx 2015). This aspect implies that the modern KPIs continue to
evolve and have a tendency to be actively used in HRM.
A qualitative research paradigm has been selected in the context of the present study, as
available materials lack hard numerical data (Kohlbacher 2006). The literature review
conducted above helps shed light on the current issue that businesses face of choosing the right
KPIs to measure performance. Nonetheless, it is critical to utilize different practical approaches
to understanding the applicability of theoretical concepts.
More specifically, a case study analysis is the qualitative approach that will be employed to
explain the performance management system of Air Arabia. This method implies using a
specific real-life example to test the set hypothesis (Kohlbacher 2006). The company’s investor
presentation will be used to determine Air Arabia’s most common and important KPIs.
Consequently, secondary information will be utilized as a basis for designing recommendations
and summarizing the outcomes. However, this research strategy could be regarded as one of
the limitations of the report, as researcher’s bias might be present.
In terms of the assessment of the company’s information, this research relies heavily on
secondary findings of the performance management system and its indicators acquired from
the available reports of Air Arabia. However, the majority of both financial and non-monetary
measures are not always transparent or open to the public. Although this fact represents the
primary limitation of the research, the investor’s presentation should still offer enough
information about the KPIs to allow the researcher to conduct the analysis and propose
recommendations.
According to Air Arabia’s investor’s presentation, the financial indicators such as revenue,
ancillary revenues, and operation play a pivotal role in the evaluation of the company’s
performance (Air Arabia 2015). Using these measures had a positive impact on the firm’s
financial stability, as the revenues have increased from AED 1.8 billion in 2007 to AED 3
billion in 2012 (Air Arabia 2015). In turn, the ancillary revenues also experienced growth from
1% to 6% over twelve years (Air Arabia 2015). However, emphasizing these KPIs does not
help the management discern the initial cause of change but rather depicts only an overall image
of financial stability.
Furthermore, Air Arabia tends to monitor the expansion of its network, as this factor indicates
changes in the company’s size and areas of operation. More specifically, the company tracks
these alterations in its subsidiaries, fleet size, and ownership. Despite the fact that these
measures are essential to the company’s financial stability, these KPIs do not portray any
information about the internal processes.
Lastly, it must be noted that Air Arabia does not underestimate its clients and carefully monitors
their loyalty by using passenger growth as a key indicator (Air Arabia 2015). Nonetheless, this
instrument portrays only numerical changes in the customer base and does not concentrate on
loyalty maintenance, customer retention, or perceived company image. In fact, it could be said
that this aspect reflects the nature of the main issue of Air Arabia’s performance management
practices, as focusing on KPIs related to customers and employees is critical in the service
segment (Phillips & Gully 2013).
An analysis of Air Arabia reveals that the company relies on the measurement of its
performance by focusing on financial indicators and other numerical measures. Despite
emphasizing these KPIs and underestimating the aspects related to HRM and customer’s
satisfaction, the company was able to increase its revenues and expand its geographical
coverage. However, following this approach in the future is questionable since business
concepts change regularly and rapidly.
Being flexible and highlighting the importance of flexible KPIs in HR will become a necessity
for the airline’s survival. Especially given the increased competition in the budget carrier
segment of the airline industry, an inability to adapt to change might be the primary cause of
loss of market share. Monitoring financial KPIs helps the company remain stable, but it does
not refer to the improvement of service quality or the commitment of personnel—even though
it is clear that employees and clients are critical definers of success in the service segment
(Phillips & Gully 2013).
These findings can be used to improve the productivity of companies in the airline industry.
Therefore, future research could be introduced to reveal more information about the company
by conducting semi-structured interviews with employees from Air Arabia. Using examples of
other firms for case studies also could be viewed as an opportunity for upcoming study.
Based on the factors above, one of the recommended solutions for Air Arabia is to introduce
additional KPIs to boost the company’s productivity and enhance service quality. In this case,
focusing on human resources, including employee commitment and satisfaction, will help take
the corporate culture in a positive direction (Phillips & Gully 2013). This aspect will have an
advantageous impact on customer retention and will increase the desire of employees to
continue working with the company.
Despite the importance of personnel to Air Arabia’s performance, one cannot underestimate the
significance of customer loyalty and satisfaction. Consumers represent a critical source of
revenue, and a better understanding of their viewpoints will boost innovation initiatives and
increase the percentage of their returns.
