AIRLINE INDUSTRY

Airline Industry

• Total passenger traffic (domestic and international) in Pakistan has

grown at a CAGR of 7.5% over the past five years with number of
passengers reported at 18m during FY17.

• Growth in international passenger traffic with a CAGR of 9.2% over

the last five years has outpaced domestic passenger traffic with a
CAGR of 2%

• Share of international passengers in overall passenger traffic

increased to 80% (FY14: 75%) while the remaining 20%
comprised domestic passengers.

Source: Aviation Industry- 2018 - JCR-VIS Credit Rating Company Limited

 Block Hours

Time from the moment the aircraft door closes at departure of a flight
until the moment the aircraft door opens at the arrival gate following its
landing.

Block hour is a measure of the total time that its aircraft is in use during a period.

Block Time = Flight Time + Taxi Time

Block Hours

• Longer BH is costly but done for one time

performance
.

• Shorter BH reduces cost but its more risker

Aircraft Utilization

Average numbers of hours during each 24-hour period

that an aircraft is actually in flight.

Measure of aircraft productivity.

AU=(aircraft block hours) /( the number of aircraft days assigned

to service on air carrier routes).
 Aircraft Utilization

Higher utilization, lower fixed costs per unit

According to Boeing, for an average trip distance of 500

nautical miles, a ten-minute reduction in turn-time will
increase the aircraft utilization by 8%

• Turn-time is the time spent at the gate between two trips for unloading and reloading cargo
and baggage, airplane service, and boarding passengers for the next trip.
LOAD FACTOR

Measures capacity utilization

The number of Revenue Passenger Miles
(RPMs) expressed as a percentage of ASM

RPMs
Load Factor =
ASMs

Number of passengers
For a single flight:
Number of seats
▫ LF is for passengers as well as cargo

▫ Generally: High LF means more profit

▫ Tends to be higher during holiday season

▫ But a flight at 100% LF with deeply discounted fares might not

breakeven
Cost Per Available Seat Kilometer
(CASK)

Cost per available seat kilometer (CASK) is a common unit of

measurement used to measure cost expressed in cash value to
operate each seat for every kilometer.

operational cost
the available seat per kilometer

• CASK is essential to determine the airlines cost performance.

• This is critical to know the airlines capacity to compete and survive the industry
 Available Seat Kilometers (ASK)

ASK is used to captures the total flight passenger capacity of an airline in kilometers

ASK=seats available × distance flown

• ASKs give airline senior management a clear indication of their capacity.

• Larger legacy carriers usually operate several types of aircraft with different seating configurations.
• The ASKs help qualify the total number of available seats and the amount each seat will fly.

10
 REVENUE PASSENGER
MILE(RPM):

A revenue passenger mile (RPM) is transportation industry metric

that shows the number of miles traveled by paying passengers and is typically
an airline traffic statistic.

RPM = Number of Paying Passengers x Total Distance Travelled

11
• Increasing RPM means more passengers are using their service.

• For example, an airplane with 100 passengers that flies 250 miles has generated 25,000 RPM.

• This metrics is most easily interpreted as a measure of productivity.

• We can try to optimize this number, either by increasing number of passenger or reducing empty
seats or encouraging the customers to travel more the company.

12
Passenger Miles Yield:

Average Fare Paid per mile, per passenger.

PASSENGER YIELD= Passenger Revenue/RPMS

• Useful in assessing changes in fares over time

• Not useful for comparisons across markets/airlines

• If currency is USD, yield is calculated in cents per mile

13
 Passenger revenue per average
seat mile (PRASM)

Referred as a measure of “PASSENGER UNIT REVENUE”.

It is calculated by dividing passenger revenue by available seat miles.

PRASM= Passenger Revenue/ Available Seat Miles (ASM)

Passenger Yield represents the average fare paid by departing passenger per
revenue passenger mile (RPM) and is used in estimating changes in fares over a time period. Yield
is not useful for comparisons across markets and/or airlines

14
THANKS!