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# Revenue passenger mile & Yield

## on Oct 29, 2011

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Explains in detail what Revenue Passenger Kilometer & Yield is. There are 7 examples to illustrate the explanations. There are 2 exercises to test the reader's knowledge.

Explains in detail what Revenue Passenger Kilometer & Yield is. There are 7 examples to illustrate the explanations. There are 2 exercises to test the reader's knowledge.

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• You are welcome Ajeng Sekar Arum. This is good to know. Take care.
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• thank you, its helping me
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• Prateek, great slides. The examples are brilliant!!!
A rookie can get the most out of your slides :)
Keep them coming and all the best!
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## Revenue passenger mile & YieldPresentation Transcript

• Prateek GarodiaREVENUE PASSENGERKILOMETER/MILE & YIELD
• What is RPK/RPM? RPM stands for Revenue Passenger Miles Countries using kilometers as a measure of distance use RPK A revenue passenger is one for whose transportation an air carrier receives commercial remuneration RPM is used to measure the number of revenue passengers flown for each mile In conjunction with revenue, this measurement is also used to calculate yield 1/20/2012 2
• RPK/RPM Calculation Revenue Passenger Mile = Revenue passengers flown * Miles traveled Let us define some variables to calculate RPK/RPM P = total number of revenue generating passengers D = total distance travelled RPK or RPM = P * D 1/20/2012 3
• Example 1 An airplane flies a distance of 2,962 miles. There are 130 passengers in the flight. What is the RPM? P = 130 D = 2,962 RPM = 130 * 2,962 = 385,060 In this example, the airline has 385,060 revenue passenger miles 1/20/2012 4
• What is FTK/FTM? FTM stands for Freight Tonne Miles Countries using kilometers as a measure of distance use FTK It is the equivalent of RPM for freight One Freight Tonne is one metric tonne of revenue load carried one mile In conjunction with revenue, this measurement is also used to calculate yield 1/20/2012 5
• FTK/FTM Calculation Freight Tonne Mile = Revenue load flown * Miles traveled Let us define some variables to calculate FTK/FTM T = total load of revenue generating freight D = total distance travelled FTK or FTM = T * D 1/20/2012 6
• Example 2 A freight carrier flies a distance of 2,962 miles. There are 130 tonnes of cargo in the flight. What is the FTM? T = 130 D = 2,962 FTM = 130 * 2,962 = 385,060 In this example, the airline has 385,060 freight tonne miles 1/20/2012 7
• What is Yield? Yield measures average earnings made by an airline by transporting revenue passengers or cargo per mile/kilometer flown In case of passengers, Passenger Yield = Passenger Revenue / Revenue Passenger Mile In case of cargo, Cargo Yield = Cargo Revenue / Freight Tonne Mile If your currency is USD, then Yield is calculated in cents per mile 1/20/2012 8
• What is Yield? It is useful in assessing changes in fare over time Yield is not useful for comparison across markets and/or airlines It varies dramatically by length of the route flown (also known as stage length) It also does not take into account the percentage of capacity used (also known as load factor) It can be calculated using gross or net revenue figures but here we will use gross figures only 1/20/2012 9
• Passenger Yield Calculation Let us define some variables to help calculate Passenger Yield RP = total passenger revenue generated P = total number of revenue generating passengers DP = total distance travelled by the passengers Passenger Yield = RP / RPM = RP / (P * DP) 1/20/2012 10
• Cargo Yield Calculation Let us define some variables to help calculate Cargo Yield RT = total freight revenue generated T = total amount of revenue generating load DT = total distance travelled in transporting freight Cargo Yield = RT / FTM = RT / (T * DT) 1/20/2012 11
• Example 3 A flight generates revenue of US\$ 36,400. It flies a distance of 2,962 miles. There are 130 passengers in the flight. What is the yield? RP = 36,400 P = 130 DP = 2,962 Yield = 36,400 / (130 * 2,962) = 36,400 / 385,060 = 0.095 In this example, the airline earned 9.5 cents or about 9 cents per passenger per mile 1/20/2012 12
• Example 4 An aircraft has a first class and an economy section. There are 12 seats in the first class section and 108 in the economy. Average fare per passenger in first class was US\$ 690. Average fare per passenger in economy class was US\$ 345. The aircraft flew a distance of 3,854 miles. What is the yield? R = (12 * 690) + (108 * 345) = 8,280 + 37,260 = 45,540 P = 12 + 108 = 120 1/20/2012 13
• Example 4 D = 3,854 Yield = 45,540 / (120 * 3,854) = 45,540 / 462,480 = 0.098 In this example, the airline earned 9.8 cents or about 10 cents per passenger per mile 1/20/2012 14
• Example 5 An aircraft has a first class and an economy section. There are 12 seats in the first class section and 108 in the economy. Average fare per passenger in first class was US\$ 690. Average fare per passenger in economy class was US\$ 345. Head sets were given out for free in the first class. In economy class, head set sale generated US\$ 500. Overall food& beverage sale generated US\$ 1,000. On an average, all passengers paid US\$ 100 extra as fuel surcharge. The aircraft flew a distance of 3,854 miles. What is the yield? 1/20/2012 15
• Example 5 R = (12 * 690) + (108 * 345) + 500 + 1,000 + 12,000 = 8,280 + 37,260 + 500 + 1,000 + 12,000 = 59,040 P = 12 + 108 = 120 D = 3,854 Yield = 59,040 / (120 * 3,854) = 59,040 / 462,480 = 0.1277 In this example, the airline earned 12.77 cents or about 13 cents per passenger per mile 1/20/2012 16
• What is Revenue? Revenue is generated by transporting either passengers or cargo or both Following are considered examples of revenue for the airline from transporting passengers Ticket fares, including fuel surcharge In-flight sales Other ancillary revenue like priority boarding, partnership with shuttle buses, rental cars, hotels, etc. 1/20/2012 17
• What is Revenue? Following are considered examples of revenue for the airline from transporting cargo Extra or oversized baggage Freight not linked to a passenger 1/20/2012 18
• What is not Revenue? Following are not considered examples of revenue for the airline Taxes, Fees & other charges – While this is extra money collected from passengers, this is not counted as revenue as the airline is collecting them on behalf of the airport and the Government. So while this adds to the gross collections by the airlines, it should not be used in gross revenue collection. 1/20/2012 19
• Example 6 An aircraft has 16 seats in first class, 58 seats in business class and 227 seats in economy section. Average fare per passenger in first class was US\$ 7,000, in business class was US\$ 4,500 and in economy class was US\$ 1,200. Passengers in first and business class on an average checked in 2 bags weighing 23 kilos each for free. Passengers in economy were allowed the first bag for free and the second for US\$ 60. 1/20/2012 20
• Example 6 About 125 passengers in economy paid for the second bag. The aircraft flew a distance of 15,380 miles. Assuming no other freight was flown, what is the passenger and cargo yield? 1/20/2012 21
• Example 6 RP = (16 * 7,000) + (58 * 4,500) + (227 * 1,200) = 112,000 + 261,000 + 272,400 = 645,400 RT = 125 * 60 = 7,500 P = 16 + 58 + 227 = 301 T = ((16 + 58+ 125) * 2 * 23) + ((227 – 125) * 23) = (199 * 46) + (102 * 23) = 9,154 + 2,346 = 11,500 = 11.5 metric tonne DP = DT = 15,380 1/20/2012 22
• Example 6 Passenger Yield = RP / (P *DP) = 645,400 / (301 * 15,380) = 645,400 / 4,629,380 = .139 Passenger Yield for the airline is 13.9 cents or almost 14 cents per passenger per mile Cargo Yield = RT / (T * DT) = 7,500 / (11.5 * 15,380) = 7,500 / 176,870 = .042 Cargo Yield for the airline is 4.2 cents per passenger per mile 1/20/2012 23
• Revenue Passengers Following are considered revenue passengers Passengers traveling on published fares Passengers using publicly available promotional offers like “Two for one” Passengers with tickets from frequent flyer miles Passengers using compensation for denied boarding Passengers travelling on corporate discounts Passengers using preferential fares like government, seamen, military, youth, student, etc. 1/20/2012 24
• Non Revenue Passengers Following are considered non revenue passengers Passengers travelling free Passengers using fares or discounts only available to airline employees or their agents Passengers travelling on business for the airline Infants who do not occupy a seat 1/20/2012 25
• Example 7 An aircraft has a first class and an economy section. There are 12 seats in the first class section and 108 in the economy. In the first class section of the aircraft, there were 2 airline executives travelling on company business. In the economy section, there was 1 person who was denied boarding in the previous flight. Average fare per passenger in first class was US\$ 690. Average fare per passenger in economy class was US\$ 345. The aircraft flew a distance of 3,854 miles. What is the yield? 1/20/2012 26
• Example 7 The 2 executives are travelling on airline business so we have to discount them. The passenger who was bumped in the previous flight will be considered as a revenue passenger for this flight. R = ((12 – 2) * 690) + (108 * 345) = (10 * 690) + (108 * 345) = 6,900 + 37,260 = 44,160 P = 10 + 108 = 118 D = 3,854 Yield = 44,160 / (118 * 3,854) = 44,160 / 454,772 = 0.097 In this example, the airline earned 9.7 cents or 10 cents per passenger per mile 1/20/2012 27
• How is Distance calculated? Airline distance between two points is calculated by first finding all the points visited en-route to the destination and then calculating great circle distances for all the route pairs For example, a flight from London to New York follows a set of points which may include Navaids, Waypoints, Airways, Departure routes, Arrival routes, and lat/long fixes 1/20/2012 28
• Exercise 1 A flight has two segments. The distance of the first segment is 10,385 miles. The distance of the second segment is 4,367 miles. In the first segment there were 30 passengers in first class, 60 passengers in the business class and 326 in the economy class. In the second segment there were 200 in the economy class. 1/20/2012 29
• Exercise 1 In the first segment, the average fare for first class was US\$ 4,752. The average fare for business class was US\$ 2,567 and for economy class was US\$ 1,135. In the second segment, the average fare for the economy class was US\$ 702. Average fuel surcharge for the first segment was US\$ 150 per person. For the second segment, it was US \$80 per person. What is the overall yield? 1/20/2012 30
• Exercise 2 An aircraft has 12 first class seats, 42 business class seats and 316 economy class seats. In the economy class there were 4 passengers traveling on company business. Average fare in first class was US\$ 12,000, business class was US\$ 6,400 while in economy class it was US\$ 850. All ticket prices included average taxes of US\$ 250. All first and business class passengers checked in their allowed 3 bags each weighing 23 kilos. 1/20/2012 31
• Exercise 2 All Economy class passengers checked in their allowed 2 bags each weighing 23 kilos. 50 economy passengers checked in an extra bag each weighing 23 kilos at US\$ 70 per bag. Food & beverage sale generated extra US\$ 2,000. The aircraft had flown a distance of 7,880 miles. What is the passenger and cargo yield? 1/20/2012 32