BASIC ECONOMIC MEASURES FOR

AIRLINES

Joha Rahman

http://pramugari.info/

THE BASIC MEASURES.

We are used to companies dealing with

physical products, like producing cars or buses.

The measures are straight forward

The unit cost will be cost per car

The production size will be .. How many cars

produced in a year.

However for airlines, the measures are

different. We do not have a physical products.

THE MEASURE OF PRODUCTS PRODUCED - ASK

Like the example of the number of cars

manufactured in a year, the production of an

airline is the ASK- Available seat kilometer.

It consists of two components, the seats and

the distant flown. So if we have an aircraft with

500 seat and flown at a distant of 10,000 km,

then we will have 5,000,000 seat km.

MEASURE OF SALES - RPK

Although the airline produced the stated ASK,

or seats, not all will be sold.. The sale of the

products will be measured by RPK.- revenue

passengers km.

So in the earlier example of 5000,000 ASK, if

only 400 out the 500 seats were sold, then the

RPK will be 4,000,000.

The aircraft was 4/5 full, or 80% full

SOME OF THE LARGE OPERATORS

Some organisation will use the term passenger

km, referring to RPK, revenue passenger km.

Some of the leading airlines are:

American Airline 197,000

Delta 162,000

Air France 126,000

Continental 125,000

The figures are in million passenger Km

MEASURE OF SALE RATE – LOAD FACTOR

For physical products, it is easier. If you product

100 cars and manage to sell 85 of them, then

you are selling 85% of it.

However for airline is different. For a single

flight, like the example where you sell 400 out

of 500 seats, the calculation is simple. You are

selling 4/5 or 80%.

80% is the load factor for the particular

flight…continue...

MEASURE OF SALE RATE – LOAD FACTOR

However an airline had many type of aircrafts

and many sectors.

Some aircraft are small and some are big.

Similarly, we have a long sectors and short

sectors.

For the load factor, it is calculated based on

RPK/ASK. Revenue passenger Km/Available

seat Km expressed in %.

MEASURE OF UNIT REVENUE - YIELD

The RPK and the ASK are measure of the

physical products.

What is more important is the revenue earned

from the sale.

Yield is measure of the revenue per the seat

produced.

Yield = total Revenue/ASK

Note: there are other measure which are not

covered.

UNIT COST (COST PER ASK)

This is the basic measure.

Unit Cost = Total Cost/ ASK

As long as the unit cost is lower than yield, the

airline will make a profit.

THE RESOURCE

Blog site: http://pramugari.info/

The author had work with an international airline

for more than 35 years, the last 10 years

in Training and development.

eMail : mktg@joharahman.com