CONSTRUCT a Balanced Scorecard table for KG Airlines, identifying two goals along with corresponding performance measures for each perspective.…

6 Balanced Scorecard Table for KG Airlines, a low-cost high efficiency airline- Perspective Strategic Objective Measure Relevance to KG Airlines Financial Perspective Goal-1 To lower costs, improve cost structure, and increase asset utilization Lease Cost per annumMaintenance Cost per annumCost per Available Seat Kilometer (CASK)Cost per Available Seat Kilometer - Ex Fuel (CASK-Ex) Input Costs like cost of fuel, leasing and labour form a major portion of operating expenses. To navigate the volatility of fuel prices, the airline must vigilantly monitor and proactively secure competitive rates for procurement, utilizing financial instruments to hedge against exposure. In pursuit of its expansion project, KG Airlines has chosen to lease planes, deeming it a more viable option given the airline's low cash reserves. Nevertheless, opting for an outright purchase, although more cost-effective in the long run, involves a significant upfront expenditure or necessitates debt servicing for acquisition. CASK is currently - 4.83 and likely to increase unless KG Airlines manages its cost structure efficiently. To achieve this efficiency, the airline is focusing on eliminating non-value-adding costs. This includes standardizing seats, exploring e-commerce channels, and charging customers separately for extra amenities like in-flight entertainment. Furthermore, KG Airlines has standardized planes that it operates in order to reduce operational costs like maintenance costs. KG Airlines' strategy is to win market through cost leadership. Hence, maintaining a lower cost structure is paramount importance to the airline. Goal-2: To boost revenue and broaden revenue streams Revenue per average seat kilometre (RASK)% revenue generated from ancillary activities% revenue generated from new routes KG Airlines wishes to build a loyal customer base by offering affordable ticket rates priced attractively in this competitive market. This will be possible only if costs can be managed efficiently. The RASK is currently at 4.80, which is lower than CASK - 4.85. This implies that the airline is not making sufficiently money to cover its costs. Therefore, the airline should pass on some of the increase in costs to the passenger without impacting demand. Simultaneously, it should monitor and enhance the profitability of its current customer base. Route planning should be done to optimize revenue generation. This will require KG Airlines to explore opportunities to improve revenue streams (eliminate unprofitable routes, determine new routes, markets and code sharing partners, refer internal perspective). Moreover, KG Airlines can improve the value provided to customers by enhancing ancillary services, including inflight entertainment, food and beverage offerings, and the sale of mementos, among others. This would make the overall bundle more appealing and potentially increase ancillary income. Customer Perspective Goal-1: Customer retention, new customer acquisition Number of repeat customersNumber of high-profile awards won/ Latest rankingsNumber of new customers Implementing a robust Customer Relationship Management (CRM) system is crucial for managing the number of repeat customers. Attractive customer loyalty programs with different redemption options play a key role in retaining the customer base. Customers will be motivated to travel again with KG Airlines to earn enough points for redemption. Moreover, KG Airlines's plan to bring higher churn in redemption of reward points by partnering with airport stores is a win-win strategy to ensure customer satisfaction while maintaining profitability. In addition, enhancing the brand image through winning high-profile awards for various services and securing above-average ratings from rating agencies contributes to both retaining and expanding the customer base. Besides, offering better connectivity through route planning at attractive prices will help to grow market share and acquire newer customers. Goal-2: Customer Satisfaction Number of flights cancelledOn time performance (OTP) statistics Average % of scheduled flight cancelled increased from 0.45% in 2022 to 1% in 2023. This impacts customer satisfaction. Despite this challenge, OTP statistics has shown improvement in 2023 compared to the previous year. Improving On-Time Performance is essential to enhance customer experience and satisfaction. However, it is necessary to keep compensation for flight delays and cancellations at minimum. Building robust capabilities in operations will reduce instances of cancellation and delays. Moreover, unresolved customer complaints have become important concerns that demand attention from higher management. The volume of these unresolved complaints has seen an increase in 2023. Integrating these initiatives into a holistic approach is crucial for ensuring a positive overall customer experience and satisfaction. Internal perspective Goal-1: Flight Operations (Cycle time optimization) 'On the ground' (turnaround) timeNo. of instances of serious lapses in flight safetyMaintenance frequency rate Fast and efficient turnaround times are critical for asset utilization to generate revenue. At the same time, flight safety is paramount to running airline operations. KG Airlines has a responsibility towards the society to ensure that safety standards are met. Given that the number of flights is likely to increase from the current number of 310 and passenger traffic is expected to rise, any incidents of flight safety concerns must be given high priority and resolved effectively. To address this, increasing capacity of on- ground technical staff by KG Airlines, such as hiring additional 100 engineers, will help to improve flight operations. Goal-2: Digitalisation (to develop the online booking & check-in system) Ratio of online booking vs. booking through travel agentsPercentage downtime of website Online booking and check-in capability will improve business operations efficiencies. To ensure effectiveness, digital capabilities must be able available at all times to the customers. Therefore, downtime has to be reduced. Given that KG Airlines expects passenger traffic to grow in the coming years, digitalizing can help it scale up operations. Furthermore, Digitalizing can also help rationalize operational costs. This is because it frees up personnel for value additive tasks and saves commission that need to be paid to travel agents (financial perspective). Goal-3: Route Network Redesign Passenger Load FactorNumber of Routes expected to be withdrawn (loss making)Number of New Routes% of Load for New RouteTime period to break-even To foster additional growth, the airline can redesign its network and may also explore potential regional routes and engage in code-sharing partnerships with other airlines. Shortage of aircrafts, high lease rental and other operational costs need to be considered while determining route network. Learning & Growth Goal-1: Staff Motivation Staff attrition rate KG Airlines should allow for personal growth of employees to combat staff attrition and staff absenteeism. Staff attrition rate increased from 10% to 15% this year. To mitigate concerns related to dissatisfaction arising from prolonged work hours and a perceived low pay scale, implementing a diverse approach can be important. Firstly, adopting a performance-based attractive pay package can serve as a powerful motivation, aligning financial rewards with individual and team accomplishments. Secondly, creating a workplace environment with ample amenities, favourable to employee well-being, further contributes to job satisfaction by addressing the physical and mental aspects of the work experience. Thirdly, incorporating team-building exercises can enhance collaboration, and overall workplace synergy, helping mitigate the challenges associated with extended work hours. Goal-2: Functional excellence and Leadership skills Strategic Skill RatioNumber of days' training per ground crew memberNumber of training programs KG Airlines should improve and maintain its strategic skill ratio (a metric that quantifies the proportion of strategic skills possessed by a workforce in comparison to the entire skill set) through training and development programs. If ground crew are better trained or multiskilled, they can reduce the number of minutes that the plane stays on the ground, which will result in fewer planes being required and therefore lower costs. Tie up with institutes for training on latest developments in aviation and other programs will allow for personal growth and career development. This will retain skilled high performing staff. Two goals, each with two corresponding performance measures, are sufficient. Additional performance measures have been included to ensure comprehensive coverage across various scenarios.