It’s earnings reporting season again and, WestJet, Canada’s leading low-fare airline, recently announced a return to first-quarter profitability, going from a net loss of $9.6MM in Q1 2005, to a profit of $12.9MM in Q1 2006.
I always enjoy reading these reports not necessarily to learn about the actual results themselves, but to learn how companies measure their progress. What are they looking at? Are they focusing on macro factors like revenue, cash flow, and net income, or are they digging into detailed metrics to try to understand more?
When monitoring a patient, a doctor doesn’t just check to see that he is breathing, 
but also keeps tabs on other vital signs such as heart rate and blood pressure, and orders appropriate xrays and tests to find out other key stats in order to make decisions on a course of action.
The WestJet earnings release was filled with great stats that explained what happened in their business. I did some consulting work for several major airlines a while back, so the terms were familiar to me – ASMs (available seat miles), RPMs (revenue passenger miles), load factor, yield, etc.
When a business has such a good handle on their key business metrics, it’s much easier to monitor the business on a constant basis. More importantly, it helps management understand how to influence those metrics. Clive Beddoe, WestJet’s CEO commented: “Our record load factors are a reflection of the significant investment we have put into our marketing efforts in recent months.”
What are the key metrics for your business? How do you know you’re on track? If you’re focused just on the basic financial statement line items, you really don’t have the full picture of your company’s health, and more importantly, you’ll have no idea what decisions to make to improve that picture.
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