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

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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

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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

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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

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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

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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

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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

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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

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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)

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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)

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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

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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

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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

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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?

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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

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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.

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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

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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.

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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.

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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?

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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

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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

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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.

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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

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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?

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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

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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

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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.

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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?

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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.

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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?

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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

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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

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Appreciation

� Dirk Albrecht, Partner, Head of Aviation

Practice, Roland Berger Strategy Consultants,

Belgium

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