Identifying the Appropriate Airline Metrics

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Flying an airplane costs a lot. It costs lives, fortune, materials, and involves investment risks. But losses can be prevented by measuring performance and by using the right airline metrics. Check additional information about airline metrics.

The airline industry, as huge as it may be, is one of the most lucrative but vulnerable business sectors in the whole world. To support the profitability of the industry, a recent New York Stock Exchange report in April of 2007 announced that six carrier corporations managed to get into top week returners, with Air France KLM topping at 99.2%. The rest of the airline entries are China Eastern, British Airways, China South, US airways, and AMR Corporation. This is an attractive record, despite the airline industry's history of slow performance in the stock market. Yet, investors are still hesitant to put their money because of the many challenges that the industry faces. Coming up with a wise decision entails proper performance management and, of course, the appropriate use of airline metrics.

One of the fiercest challenges the industry faces is the unpredictable weather. In 2006, the US Department of Transportation reports that over twenty-two million minutes were wasted due to flight delays. The record breaking report can be translated to more than 42 years of flight delays. According to the Department of Transportation, this large figure was caused by twenty two percent of the flights in that year. Moreover, less than twenty percent of accumulated delays were only recorded in 2005. As alarming as it may seem, only 1972 complains were received in 2006 against the 9235 that were received in the year 2000. The main cause of flight delays is, of course, weather.

What do these data mean? They all mean one thing, that it is indeed very important to always keep track of the performance of each department in an airline company. Millions of dollars could be lost because of these flight delays. And while weather is an inevitable challenge, negligence, wrong decision making, and mismanagement are culprits that can be prevented. For investors and shareholders, it is therefore a must to get hold of that data, the data that shows how well each aspect in the company is working. Information that typically shareholders are interested in are: the duration of the flight, the revenue produced out from that duration, and the cost of flying the aircraft in that duration.

In order for airline managers to provide these comprehensive reports to the shareholders, they need to incorporate the four metrics. These are the ASM, RASM, CASM, and the break-even load factor.

ASM stands for available seat miles. This metric has something to do with the paid seats and the distance those seats can take its passenger. It can be calculated by multiplying the paid seats by the distance in miles the seats are carried.

RASM means revenue per available seat mile. It refers to the sum of passenger income divided by the vacant seat miles. The figure is usually displayed in cents format.

CASM or cost per available seat mile is more like a way of calculating the operating expenses. The value can be obtained by dividing the operating cost by the vacant seat miles.

The fourth metric is the break-even load factor. This represents the percentage of airplane seats that must be occupied to at least match or cover the expenses of flying those seats.

If you take a look at the airline metrics mentioned previously, these are actually very self-explanatory. Yet, there are still airline companies that fail to deliver good service when it comes to the prevention of flight delays. Again, the airline industry is a big industry. But it is only through proper performance management that attractive bottom lines can be achieved.

If you are interested in airline metrics, check this link to find out more about airline roi. Also, you can check other articles in General category.

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