airtrev
Posts: 2
Joined: Sat Jun 04, 2005 7:21 pm

How Much Is A Seat Worth Per Year

How much is a seat pax worth per year to the airlines.

Some say an increase of 4% of seats can more than double an airlines profit, depending on how close to their breakeven point they're operating

LawnDart
Posts: 862
Joined: Fri May 20, 2005 11:33 pm

RE: How Much Is A Seat Worth Per Year

 Quoting Airtrev (Thread starter):How much is a seat pax worth per year to the airlines.

Airtrev, not sure what you're asking...how much revenue can an airline generate per seat? How much is a revenue passenger mile?

It all depends on how much the seat costs to fly: Cost per Available Seat Mile, or CASM. The figure is usually expressed (here in the States) in cents; 8.5 cents per mile, for instance. Then, how much Revenue per Available Seat Mile the airline can generate for each, also expressed in cents.

A lot of different variables go in to the cost side of the equation, including aircraft ownership costs, operating cost such as landing / navigation fees, maintenance, employee costs and fuel (and much more)

And a lot goes in to the revenue side...how much can you expect to get from each passenger, and adjusting your fare levels accordingly.

In the end, hopefully you'll pull in more revenue than you'll pay out as expenses.

 Quoting Airtrev (Thread starter):Some say an increase of 4% of seats can more than double an airlines profit, depending on how close to their breakeven point they're operating

If you have 100 seats that you charge the same amount to sell each, and you're at your breakeven load factor when you sell all of them (you're generating as much revenue as you're spending to operate the flight), then adding 4 more seats (assuming it doesn't cost you any more to add / fly them, and you charge the same amount as for the others), will improve your revenue by 4%.

airtrev
Posts: 2
Joined: Sat Jun 04, 2005 7:21 pm

RE: How Much Is A Seat Worth Per Year

LawnDart, taking a 100 seat aircraft
Scenario 1.
a. 100 seats and the break even is 80% (80 seats need to be sold)
b. Seat turnover per day is say \$500
c. Surly this means it costs 80 seats X \$500 = \$40,000 per to operate
d. If the aircraft is operating at say 84% load factor, 84 X \$500 = \$42,000.
e. Aircraft is making \$2,000 profit per day

Scenario 2.
a. If you can get 10% more seats on =110 seats
b. To operate the aircraft you still have to sell 80 seats to breakeven (\$40,000 per day)
c. Aircraft is operating at 84% load factor
d. 84% of 110 seats is 92.4 seats
e. 92.4 seat X \$500 = \$46,200
f. Aircraft is making \$6,200 profit per day
g. 3.1 times the profit

As you say assuming it doesn't cost you any more to add/fly them. Take some of to allow for this, the aircraft should still well more than double profits.

If this theory is right and airline who's operating load factor is closer than 4% to the breakeven, this would increase profits further

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