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Taking flight: How airlines benefit from incentive compensation

By January 28, 2013June 11th, 2024No Comments

Most travelers are familiar with the logistical perils of air travel. What frequent flyer hasn’t dealt with delays, cancelations, missed connections, lost baggage or one of the many disruptions that can leave customers feeling stressed and frustrated? While it’s not always easy to maintain perspective when something’s gone awry, airline and airport employees work diligently, often in stressful situations, to keep things moving. Recently, several airlines encouraged their employees to take it to the next level with incentive compensation packages based on productivity and successful flight experiences. This win-win-win for airlines, employees and customers is already producing tangible benefits.

United Airlines rides incentive compensation to profits
United Airlines recently reported that it netted more than $1 billion in net income in 2013, an 84 percent year-over-year increase from 2012 numbers. The company attributed part of this growth to a high rate of on-time flights, with 79.3 percent of its domestic and international flights staying on schedule. It also said that much of the credit should go to its employees, who participated in an incentive compensation that tied extra cash to the number of flights that stayed their course. Overall, United employees collectively earned $54 million in cash incentive payments in 2013. The airline was also able to invest in its customer service training program, ensuring that more traveler interactions will be productive, efficient and satisfying.

American Airlines debuts incentive compensation project
Perhaps taking its cue from its competitor in the skies, American also announced that it was implementing an incentive compensation plan that would give workers up to an extra $150 per month for industry-best operation, the Star-Telegram reported. The creatively titled Ops Olympics will take various operational procedures into account, including on-time plane arrivals, baggage performance and traveler satisfaction. Employees receive gold, silver or bronze “medals” – and cash – if American outperforms its competitors in these categories.

“[L]et’s get ready to compete,” American chief operating officer Robert Isom wrote to employees. “We have a long race ahead of us against fierce competition, but I know that we are up to the challenge if we work together.”

Building your own loyalty program
Both of these airlines are leveraging incentive compensation programs that have a positive impact for everyone involved. Uniting employees against competitors is a great way to encourage all personnel to work together to achieve the same goal. This can create an atmosphere of productive and collaborative behavior, as well as improve communication. Plus, employees feel rewarded for their efforts, and in turn become more loyal to their organization and co-workers.

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Ballast Point Ventures

Ballast Point Ventures is a later-stage venture capital fund established to provide expansion capital for rapidly growing, privately owned companies in diverse industries, with a particular emphasis on companies located in Florida, the Southeast, and Texas. The BPV partners have more than 70 years of combined experience investing in and building high-growth companies in a number of industries, including healthcare, business services, communications, technology, financial services, and consumer goods. BPV has $200 million under management and seeks to make equity investments ranging from $3 million to $10 million.

Harbert Management Corporation

Harbert Management Corporation seeks to generate superior returns for their investors by identifying and investing in the most promising early growth stage companies in the Southeastern U.S. HMC seeks to capitalize on what it believes are compelling regional dynamics, such as a strong and fast-growing economy, significant research and development activities, and an established entrepreneurial community. The HMC team combines substantial investment, advisory, and operating experience with capital and networking contacts to support great entrepreneurial teams in successfully executing their growth plans. With offices in Birmingham, Alabama; Richmond, Virginia; and Gainesville, Florida, it’s well positioned to partner with entrepreneurs throughout the Southeast.

KBH Ventures

KBH Ventures was an early investor in Iconixx Software. KBH's investment philosophy plays a significant role in the firm's successful track record. KBH believes in running businesses to be cashflow positive and profitable every month. Startups and companies in a startup mode, such as one that has been purchased in distress, are expected to generate revenue within the first six months and reach profitability within the first 12 to 18 months. KBH also only invests in or acquires companies that are in the startup phase or have less than $20 million in revenues. KBH targets technology companies that offer business-to-business services.

S3 Ventures

S3 Ventures is an early expansion and growth stage venture firm with $200 million under management. It’s focused on information technology solutions that solve large business problems. S3 also invests in medical devices that improve the human condition. S3 invests in category-defining opportunities. It partners with the team and help focus methodically on what it takes to build a successful company. S3 today helps talented entrepreneurs take their technology and market knowledge and form valuable businesses in a repeatable fashion. Investment sizes start at several million or more for Series A, B, and C financing.