What it means
An airline's basic product is a seat flown over a distance. One seat flown for one mile is called an available seat mile, and it is the standard unit of capacity.
RASM divides total operating revenue by the number of available seat miles to show the revenue produced per unit of capacity. The ratio rises when the airline fills more seats or when it charges higher fares, or both.
It also includes income beyond tickets, such as baggage fees, cargo and onboard sales, because total operating revenue is used, and it moves whenever any of these streams changes. That makes it broader than yield, which looks only at passenger revenue per mile sold.
RASM is most useful when placed next to CASM, which is cost per available seat mile. The gap between the two tells you the profit margin per unit of capacity.
If RASM is 9 cents and CASM is 8 cents, the airline earns about 1 cent per seat mile before any one-off items. Because routes differ, comparing RASM across carriers needs care.
Long flights spread costs over more miles, so they tend to show lower RASM than short flights. Analysts compare an airline with its own past results, adjust for the length of flights and look at changes from quarter to quarter.
Airlines manage RASM through pricing, scheduling and route choices. Cutting capacity on weak routes can lift RASM because the remaining seats are fuller, though it may reduce total revenue.
Management must therefore balance the ratio with overall profit. Outside factors also move the figure.
Fuel prices affect fares indirectly, economic cycles change demand for business travel, and seasonal peaks lift RASM in holiday months, so a fair comparison uses the same period in earlier years.
In practice
Real-world examples.
Example
An airline reports RASM of 12.5 cents compared with 11.8 cents a year earlier. The 0.7 cent rise comes mostly from higher fares on busy routes, which management links to strong business travel demand.
Example
A low-cost carrier has RASM of 7 cents and CASM of 6 cents. Its management explains that the unit revenue is lower than rivals but the cost base is lower still, so profit per seat mile is similar.
Example
An airline cuts its weakest evening flights, reducing capacity by 4%. RASM rises 3% because the remaining flights are fuller, but total revenue falls slightly, so the board reviews whether profit improved. Staff costs saved on the cancelled flights turn out to outweigh the lost revenue.
Formula
Calculation
RASM = Total operating revenue / Available seat miles
Spread = RASM - CASM
Suppose an airline earns $900,000,000 in a quarter and flies 10,000,000,000 available seat miles. RASM is $900,000,000 / 10,000,000,000 = $0.09, or 9.0 cents. If CASM is 8.0 cents, the spread is 1.0 cent, and across 10,000,000,000 seat miles that is $100,000,000 of operating profit.Case study
Seen in the real world.
Meridian Air is an illustrative, fictional airline that noticed its RASM was falling for three quarters in a row, even though its planes were as full as ever. The commercial director suspected that fares were the problem.
She found that heavy discounting on competitive routes was filling seats at lower prices, and that new long routes lowered the average because RASM is naturally lower on longer flights. After adjusting for flight length, the underlying decline was smaller than it looked, but still real.
In this fictional case the airline reduced its deepest discounts and shifted capacity to routes where demand was stronger. The illustrative lesson is that RASM is a combined signal of load, price and mix, so you must understand what is driving the change before acting on it. The commercial director now reports RASM split into load, fare and route mix.
Watch out
Common mistakes.
- Comparing RASM across airlines with very different average flight lengths without adjusting.
- Looking at RASM without CASM, which hides whether the airline is actually profitable.
- Assuming that a higher RASM always means higher profit, when capacity cuts can raise RASM but reduce total revenue.
Questions
People also ask.
What is the difference between RASM and yield?
Yield measures passenger revenue per mile that was actually sold, while RASM measures total revenue per mile of seat capacity, whether sold or not.
Why is RASM quoted in cents?
Because the amounts per seat mile are small fractions of a dollar, so a figure such as 9.0 cents is easier to read than 0.09 dollars, and it makes small changes of a tenth of a cent visible.
What is PRASM?
It is passenger revenue per available seat mile, which is similar to RASM but counts only ticket revenue and leaves out other income such as cargo.
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