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Explains in detail what Revenue Passenger Kilometer & Yield is. There are 7 examples to illustrate the explanations. There are 2 exercises to test the reader's knowledge.
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REVENUE PASSENGER
KILOMETER/MILE & YIELD
Prateek Garodia
What is RPK/RPM?
� RPM stands for Revenue Passenger Miles
� Countries using kilometers as a measure of distance use RPK
� A revenue passenger is one for whose � A revenue passenger is one for whose transportation an air carrier receives commercial remuneration
� RPM is used to measure the number of revenue passengers flown for each mile
� In conjunction with revenue, this measurement is also used to calculate yield
1/20/2012 2
RPK/RPM Calculation
� Revenue Passenger Mile = Revenue
passengers flown * Miles traveled
� Let us define some variables to calculate
RPK/RPMRPK/RPM
� P = total number of revenue generating
passengers
� D = total distance travelled
� RPK or RPM = P * D
1/20/2012 3
Example 1
� An airplane flies a distance of 2,962 miles.
There are 130 passengers in the flight. What is
the RPM?
� P = 130� P = 130
� D = 2,962
� RPM = 130 * 2,962 = 385,060
� In this example, the airline has 385,060
revenue passenger miles
1/20/2012 4
What is FTK/FTM?
� FTM stands for Freight Tonne Miles
� Countries using kilometers as a measure of
distance use FTK
� It is the equivalent of RPM for freight� It is the equivalent of RPM for freight
� One Freight Tonne is one metric tonne of
revenue load carried one mile
� In conjunction with revenue, this
measurement is also used to calculate yield
1/20/2012 5
FTK/FTM Calculation
� Freight Tonne Mile = Revenue load flown *
Miles traveled
� Let us define some variables to calculate
FTK/FTMFTK/FTM
� T = total load of revenue generating freight
� D = total distance travelled
� FTK or FTM = T * D
1/20/2012 6
Example 2
� A freight carrier flies a distance of 2,962
miles. There are 130 tonnes of cargo in the
flight. What is the FTM?
� T = 130� T = 130
� D = 2,962
� FTM = 130 * 2,962 = 385,060
� In this example, the airline has 385,060
freight tonne miles
1/20/2012 7
What is Yield?
� Yield measures average earnings made by an
airline by transporting revenue passengers or
cargo per mile/kilometer flown
� In case of passengers, Passenger Yield = � In case of passengers, Passenger Yield =
Passenger Revenue / Revenue Passenger Mile
� In case of cargo, Cargo Yield = Cargo Revenue
/ Freight Tonne Mile
� If your currency is USD, then Yield is
calculated in cents per mile
1/20/2012 8
What is Yield?
� It is useful in assessing changes in fare over time
� Yield is not useful for comparison across markets
and/or airlines
� It varies dramatically by length of the route flown (also � It varies dramatically by length of the route flown (also
known as stage length)
� It also does not take into account the percentage of
capacity used (also known as load factor)
� It can be calculated using gross or net revenue
figures but here we will use gross figures only
1/20/2012 9
Passenger Yield Calculation
� Let us define some variables to help calculate
Passenger Yield
� RP = total passenger revenue generated
� P = total number of revenue generating � P = total number of revenue generating
passengers
� DP = total distance travelled by the
passengers
� Passenger Yield = RP / RPM = RP / (P * DP)
1/20/2012 10
Cargo Yield Calculation
� Let us define some variables to help calculate
Cargo Yield
� RT = total freight revenue generated
� T = total amount of revenue generating load� T = total amount of revenue generating load
� DT = total distance travelled in transporting
freight
� Cargo Yield = RT / FTM = RT / (T * DT)
1/20/2012 11
Example 3
� A flight generates revenue of US$ 36,400. It flies a distance of 2,962 miles. There are 130 passengers in the flight. What is the yield?
� RP = 36,400� RP = 36,400
� P = 130
� DP = 2,962
� Yield = 36,400 / (130 * 2,962) = 36,400 / 385,060 = 0.095
� In this example, the airline earned 9.5 cents or about 9 cents per passenger per mile
1/20/2012 12
Example 4
� An aircraft has a first class and an economy section. There are 12 seats in the first class section and 108 in the economy. Average fare per passenger in first class was US$ 690. Average fare per passenger in economy class per passenger in first class was US$ 690. Average fare per passenger in economy class was US$ 345. The aircraft flew a distance of 3,854 miles. What is the yield?
� R = (12 * 690) + (108 * 345) = 8,280 + 37,260 = 45,540
� P = 12 + 108 = 120
1/20/2012 13
Example 4
� D = 3,854
� Yield = 45,540 / (120 * 3,854) = 45,540 /
462,480 = 0.098
� In this example, the airline earned 9.8 cents � In this example, the airline earned 9.8 cents
or about 10 cents per passenger per mile
1/20/2012 14
Example 5
� An aircraft has a first class and an economy section. There are 12 seats in the first class section and 108 in the economy. Average fare per passenger in first class was US$ 690. Average fare per passenger in economy class was US$ fare per passenger in economy class was US$ 345. Head sets were given out for free in the first class. In economy class, head set sale generated US$ 500. Overall food& beverage sale generated US$ 1,000. On an average, all passengers paid US$ 100 extra as fuel surcharge. The aircraft flew a distance of 3,854 miles. What is the yield?
1/20/2012 15
Example 5
� R = (12 * 690) + (108 * 345) + 500 + 1,000 +
12,000 = 8,280 + 37,260 + 500 + 1,000 +
12,000 = 59,040
� P = 12 + 108 = 120� P = 12 + 108 = 120
� D = 3,854
� Yield = 59,040 / (120 * 3,854) = 59,040 /
462,480 = 0.1277
� In this example, the airline earned 12.77 cents
or about 13 cents per passenger per mile
1/20/2012 16
What is Revenue?
� Revenue is generated by transporting either passengers or cargo or both
� Following are considered examples of revenue for the airline from transporting revenue for the airline from transporting passengers� Ticket fares, including fuel surcharge
� In-flight sales
� Other ancillary revenue like priority boarding, partnership with shuttle buses, rental cars, hotels, etc.
1/20/2012 17
What is Revenue?
� Following are considered examples of
revenue for the airline from transporting
cargo
� Extra or oversized baggage� Extra or oversized baggage
� Freight not linked to a passenger
1/20/2012 18
What is not Revenue?
� Following are not considered examples of
revenue for the airline
� Taxes, Fees & other charges – While this is extra
money collected from passengers, this is not money collected from passengers, this is not
counted as revenue as the airline is collecting
them on behalf of the airport and the
Government. So while this adds to the gross
collections by the airlines, it should not be used in
gross revenue collection.
1/20/2012 19
Example 6
� An aircraft has 16 seats in first class, 58 seats in
business class and 227 seats in economy section.
Average fare per passenger in first class was US$
7,000, in business class was US$ 4,500 and in 7,000, in business class was US$ 4,500 and in
economy class was US$ 1,200.
� Passengers in first and business class on an
average checked in 2 bags weighing 23 kilos each
for free. Passengers in economy were allowed
the first bag for free and the second for US$ 60.
1/20/2012 20
Example 6
� About 125 passengers in economy paid for
the second bag. The aircraft flew a distance of
15,380 miles.
� Assuming no other freight was flown, what is � Assuming no other freight was flown, what is
the passenger and cargo yield?
1/20/2012 21
Example 6
� RP = (16 * 7,000) + (58 * 4,500) + (227 * 1,200)
= 112,000 + 261,000 + 272,400 = 645,400
� RT = 125 * 60 = 7,500
� P = 16 + 58 + 227 = 301� P = 16 + 58 + 227 = 301
� T = ((16 + 58+ 125) * 2 * 23) + ((227 – 125) * 23)
= (199 * 46) + (102 * 23) = 9,154 + 2,346 =
11,500 = 11.5 metric tonne
� DP = DT = 15,380
1/20/2012 22
Example 6
� Passenger Yield = RP / (P *DP) = 645,400 / (301
* 15,380) = 645,400 / 4,629,380 = .139
� Passenger Yield for the airline is 13.9 cents or
almost 14 cents per passenger per milealmost 14 cents per passenger per mile
� Cargo Yield = RT / (T * DT) = 7,500 / (11.5 *
15,380) = 7,500 / 176,870 = .042
� Cargo Yield for the airline is 4.2 cents per
passenger per mile
1/20/2012 23
Revenue Passengers
� Following are considered revenue passengers� Passengers traveling on published fares
� Passengers using publicly available promotional offers like “Two for one”offers like “Two for one”
� Passengers with tickets from frequent flyer miles
� Passengers using compensation for denied boarding
� Passengers travelling on corporate discounts
� Passengers using preferential fares like government, seamen, military, youth, student, etc.
1/20/2012 24
Non Revenue Passengers
� Following are considered non revenue
passengers
� Passengers travelling free
� Passengers using fares or discounts only available � Passengers using fares or discounts only available
to airline employees or their agents
� Passengers travelling on business for the airline
� Infants who do not occupy a seat
1/20/2012 25
Example 7
� An aircraft has a first class and an economy section. There are 12 seats in the first class section and 108 in the economy. In the first class section of the aircraft, there were 2 airline executives travelling on company business. In executives travelling on company business. In the economy section, there was 1 person who was denied boarding in the previous flight. Average fare per passenger in first class was US$ 690. Average fare per passenger in economy class was US$ 345. The aircraft flew a distance of 3,854 miles. What is the yield?
1/20/2012 26
Example 7
� The 2 executives are travelling on airline business so we have to discount them. The passenger who was bumped in the previous flight will be considered as a revenue passenger for this flight.
� R = ((12 – 2) * 690) + (108 * 345) = (10 * 690) + (108 * 345) = 6,900 + 37,260 = 44,160
� R = ((12 – 2) * 690) + (108 * 345) = (10 * 690) + (108 * 345) = 6,900 + 37,260 = 44,160
� P = 10 + 108 = 118
� D = 3,854
� Yield = 44,160 / (118 * 3,854) = 44,160 / 454,772 = 0.097
� In this example, the airline earned 9.7 cents or 10 cents per passenger per mile
1/20/2012 27
How is Distance calculated?
� Airline distance between two points is
calculated by first finding all the points visited
en-route to the destination and then
calculating great circle distances for all the calculating great circle distances for all the
route pairs
� For example, a flight from London to New
York follows a set of points which may include
Navaids, Waypoints, Airways, Departure
routes, Arrival routes, and lat/long fixes
1/20/2012 28
Exercise 1
� A flight has two segments. The distance of
the first segment is 10,385 miles. The distance
of the second segment is 4,367 miles. In the
first segment there were 30 passengers in first segment there were 30 passengers in
first class, 60 passengers in the business class
and 326 in the economy class. In the second
segment there were 200 in the economy
class.
1/20/2012 29
Exercise 1
� In the first segment, the average fare for first class was US$ 4,752. The average fare for business class was US$ 2,567 and for economy class was US$ 1,135. economy class was US$ 1,135.
� In the second segment, the average fare for the economy class was US$ 702.
� Average fuel surcharge for the first segment was US$ 150 per person. For the second segment, it was US $80 per person.
� What is the overall yield?
1/20/2012 30
Exercise 2
� An aircraft has 12 first class seats, 42 business
class seats and 316 economy class seats. In the
economy class there were 4 passengers traveling
on company business. on company business.
� Average fare in first class was US$ 12,000,
business class was US$ 6,400 while in economy
class it was US$ 850. All ticket prices included
average taxes of US$ 250.
� All first and business class passengers checked in
their allowed 3 bags each weighing 23 kilos.
1/20/2012 31
Exercise 2
� All Economy class passengers checked in
their allowed 2 bags each weighing 23 kilos.
50 economy passengers checked in an extra
bag each weighing 23 kilos at US$ 70 per bag. bag each weighing 23 kilos at US$ 70 per bag.
� Food & beverage sale generated extra US$
2,000.
� The aircraft had flown a distance of 7,880
miles.
� What is the passenger and cargo yield?
1/20/2012 32
References
� http://en.wikipedia.org/wiki/Revenue_passenger_mile
� http://moneyterms.co.uk/rpk-revenue-passenger-kilometres/
� http://icaodata.com/Terms.aspx#RevenuePasse� http://icaodata.com/Terms.aspx#RevenuePassenger
� http://www.airliners.net/aviation-forums/general_aviation/read.main/3582373/
� http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&discussionID=76033155&gid=59519&commentID=55329309&trk=view_disc&ut=1XhPa6HzrtskY1
1/20/2012 33
References
� http://moneyterms.co.uk/ftk-freight-tonne-kilometres/http://icaodata.com/Terms.aspx#RevenuePassenger
� http://web.mit.edu/airlinedata/www/Res_Glo� http://web.mit.edu/airlinedata/www/Res_Glossary.html
� http://travel.stackexchange.com/questions/2695/how-to-calculate-the-air-line-distance-between-two-places
� http://www.aa.com/i18n/amrcorp/corporateInformation/facts/measurements.jsp
1/20/2012 34
Appreciation
� Dirk Albrecht, Partner, Head of Aviation
Practice, Roland Berger Strategy Consultants,
Belgium
1/20/2012 35
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