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Metrics

Of
Airline Industry
Marketing Analytics
Greetings!
From

Yamna Hasan Nimra Arshad Areeba Hafeez Qadeer Ahmed


(20154) (20155) (20042) (14701)
What are Metrics ?
The Metrics are the quantifiable measure that are used to
track and assess the status of a specific business process.

It's important to note that business metrics should be


employed to address key audiences surrounding a
business, such as investors, customers, and different types
of employees, such as executives and middle managers.
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Analytics in Airline Industry

Inheritably the aviation industry is a high


cost industry with high fixed costs (fleet
size, airports) as well as high operating
costs (fuel cost, taxes, landing charges
etc.)

The aviation market today, is also seeing


an onslaught of low cost carriers,
increased cross-border players and
changing consumer desires.
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Aircraft Utilization
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Aircraft utilization measure of
the average number of hours that
each aircraft is flying in each 24
hours period.

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Implication & Usage

It is a measure of aircraft productivity, calculated by dividing aircraft block hours by the


number of aircraft days assigned to service on air carrier routes. Typically present in block
hours per day.

Utilization is a statistic that varies from carrier to carrier and is normally considered a
closely guarded corporate trade secret and is not tracked by government.

It is an important measure of operational efficiencies that low-cost airlines count on to


lower unit costs.

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Factors affecting utilization rates

Airplane availability: the total number of days in a given period minus downtime
required for airplane maintenance

Average elapsed time per trip: the average block time per trip distance plus the
average turn-time

Maximum number of trips: the airplane availability divided by the average


elapsed time for a trip
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Revenue
Passenger Miles
(RPM) 9
RPM measures the volume of
passengers carried by an airline.

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Implication & Usage

It is an airline industry metric that shows the number of kilometers traveled by paying
passengers.

Calculated as; RPM = Number of Paying Passengers x Total Distance Travelled

Since it measures the actual demand for air transport, it is often referred to as airline
traffic.

P.S. RPM is also known as Revenue Passenger Kilometers (RPK). In the aviation industry, kilometers are
used more often than miles in formulation and analysis of metrics and key performance indicators.

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Implication & Usage

RPMs are the backbone of most transportation metrics. Airlines have to try to match their
supply (ASMs) with the market demand (RPMs). While shortage of seats will often result in
higher airfare, excess capacity can lead to reduced margins due to higher fixed costs. So an
increase in capacity is positive only if it is supported by an adequate rise in demand for air
travel.

RPMs give airline senior management a clear indication of the demand in a given market.
To support RPM improvement, airlines should add more seats or increase capacity. Another
way to do this without adding capacity is to improve efficiency by utilizing existing
capacity.

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Passenger Revenue per
Available Seat Miles
(PRASM)
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Passenger Revenue per Available Seat Mile

Passenger Revenue
(RASM) =
Available Seat Miles (ASM)

Represents how much an airline is making for each


unit of capacity
Also known as, Unit Measure
Typically represented in Cents per mile
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Importance and Implications

Its a way of examining sales relative to capacity.


Measure of efficiency
Helps in comparing various airlines
If capacity (ASM) increases faster than sales (PR) ,
PRASM will go down

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Cost per
Available Seat Miles
(CASM) 17
Cost per Available Seat Mile

Operating Cost
(CASM) =
Available Seat Miles (ASM)

Simply, cost for an airline to fly one seat per mile


Also represented in Cents per mile
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Importance and Implications

Its a way of examining cost relative to capacity.


Measure of efficiency
Helps in comparing various airlines
Fuel Cost The most important yet uncontrollable component
Many carriers exclude fuel costs
If Company can increase capacity (ASM) without adding cost, CASM
will improve
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