What is yield?

[AcroChik]

PowerPoint Presentation

For those of you with a mathematical inclination, here is a PowerPoint presentation that delves into the econometrics of loadfactors, yield management and some exotic mysteries of airline accounting (which in my opinion is very much like Hollywood accounting).

It takes a while to work through this presentation, but it does build to a logical conclusion.

http://www.ima.umn.edu/talks/workshops/11-11-15.2002/smith/smith.ppt

 

[Maktub]

Yield

I don't think that any of the above explanations accurately define what yield is. First start by defining a few terms of measurement:

ASM - 1 seat that flies 1 mile on a plane, regardless if that seat is occupied or not. So if we have a haul length of 100 miles and the plane has 100 seats, our ASMs are 10,000 (100*100)

RASM - Revenue per ASM. Total revenue on flight, say $50,000, divided by ASMs ($50,000/10,000) = $5 (unrealistic, but this is just an example).

Load Factor - % of seats occupied on the plane. If 85 passengers are on this plane, the load factor is 85%.

RPM - Revenue Passenger Miles, which is Load Factor*ASM. In this example it is .85*10,000 or 8,500.

Yield - Revenue divided by RPMs. So in this example, yield is $50,000/8,500 or $5.88

Average fare - Yield*length of haul. $5.88*100 or $588.

Yield is beneficial for airlines with different haul lenghts to look at over average fare because it factors in the length of haul. It gives a standard. A route with the same revenue and average fare but a longer length of haul will have a lower yeild.