Revenue Per Available Seat Mile

Definition

Revenue per Available Seat Mile (RASM) is a metric used to measure the efficiency of airlines. It is calculated by dividing operating revenue by available seat miles (ASM). A higher RASM generally indicates a more profitable airline. Revenue is expressed in cents and includes ticket sales as well as other income sources.

Origin

The concept of RASM originated from the need within the airline industry to better assess and compare the operational efficiency of different airlines. As the industry globalized and competition intensified, RASM became a crucial financial metric.

Categories and Features

RASM can be broken down into different revenue sources, such as passenger revenue, cargo revenue, and other ancillary income. Its features include providing a comprehensive reflection of an airline's overall profitability and operational efficiency. High RASM typically indicates strong performance in pricing, route selection, and cost management.

Case Studies

For instance, Delta Air Lines reported an increase in RASM in a particular quarter, primarily due to successful pricing strategies and route optimization. Another example is American Airlines, which significantly boosted its RASM by enhancing customer service and increasing ancillary service revenue.

Common Issues

Investors often misunderstand RASM as being solely related to ticket revenue, overlooking the impact of other income sources. Additionally, a high RASM does not always equate to strong profitability, as it does not account for cost factors.