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# Basic economic measures for airlines

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The basic economic metric used in the industry. The basic measures explained are the ASK, RPK, Yield, Unit Cost and load factor

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### Basic economic measures for airlines

1. 1. BASIC ECONOMIC MEASURES FOR AIRLINES Joha Rahman http://pramugari.info/
2. 2. 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.
3. 3. 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.
4. 4. 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
5. 5. 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
6. 6. 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...
7. 7. 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 %.
8. 8. 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.
9. 9. 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.
10. 10. 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