Basic Measurements In The Airline Business

Available Seat Mile (ASM): The Basic Measure of Capacity

  • One seat (empty or filled) flying one mile is an ASM
  • A 140-seat MD-80 flying a 500-mile segment creates 70,000 ASMs.
  • System ASMs are simply the sum of each of these individual segment calculations
  • In a typical day in 2007; American made available about 465 million ASMs

Revenue Passenger Mile (RPM): The Basic Measure of Production

  • A paying passenger flying one mile creates an RPM
  • 100 passengers flying 500 miles generates 50,000 RPMs
  • System RPMs are the sum of this calculation for each of the revenue segments we fly.
  • In a typical day in 2007, American produced 380 million RPMs.

Load Factor: Production Compared to Capacity

  • To calculate system-wide load factor, divide RPMs by ASMs; in 2007 it's 138.5 billion RPMs divided by 169.9 billion ASMs, or 81.5 percent.
  • For an individual flight, divide the revenue passengers on board by the aircraft capacity; in the MD-80 example above, it is 100 divided by 140, or 71.4 percent.
  • High load factors are not necessarily desirable - How much each passenger pays is also important, as we see in the next measure.

Yield: Revenue per Passenger Mile

  • To calculate system yield, divide passenger revenue by total RPMs; For American in 2007, this is $18.2 billion divided by 138.5 billion RPMs, or 13.1 cents per mile.
  • To calculate a customer's individual yield, divide ticket price by mileage; if a customer pays $98.00 for the 500-mile segment above, the yield would be 19.6 cents per mile.

Revenue per Available Seat Mile (R/ASM): The Best Basic Measure

  • Multiply load factor times yield to get the measure of how much revenue we generate per increment of capacity; using the 2007 example above, it's 81.5 percent times 13.1 cents or 10.7 cents.

Cost per Available Seat Mile (C/ASM): The Basic Measure Of Cost

  • Unit costs represent how much it costs to fly one seat (empty or filled) one-mile.

To calculate unit costs, divide total operating expenses by Total ASM capacity; For American in 2007, this is $19.24 billion divided by 169.9 billion, or 11.3 cents per mile.