Airlines run on per-seat-kilometre economics, because the seat-kilometre is the true unit of production. Learn the vocabulary once and it never changes:
- ASK, Available Seat Kilometres = seats offered × kilometres flown. It's your capacity, the flying you could sell.
- RPK, Revenue Passenger Kilometres = passengers carried × kilometres flown. It's the capacity you did sell.
- Load factor = RPK / ASK, the percentage of seats filled. A fullness ratio.
- Yield = passenger revenue / RPK, the average fare per passenger-kilometre. In other words, price.
- RASK, Revenue per ASK = total operating revenue / ASK. This is unit revenue, and it includes ancillary. For the passenger line alone, PRASK = passenger revenue / ASK = yield × load factor. That identity is worth burning in, because unit passenger revenue is price times fullness. You can lift RASK by charging more (yield) or by filling more seats (load factor). The two often trade off, and the airline game is played on that trade-off.
- CASK, Cost per ASK = total operating cost / ASK, the unit cost. Split it in two. CASK ex-fuel is the bit management controls, and fuel is the bit the world controls.
- Unit profit = RASK − CASK, operating profit per seat-kilometre. This is the number to watch. In a good year it might be ₹0.40 to 0.60 per ASK on a RASK of ~₹4.50. That's an operating margin of only ~9 to 13% at the cycle's best, and single-digit or negative in ordinary years. Margins that thin are the operating-leverage warning. Layer a fuel spike on a few points of load factor or yield and the profit can vanish entirely.
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Which other levers move airline unit economics?
Two more dials:
- Aircraft utilisation is block hours flown per aircraft per day. LCCs push 12 to 14+ hours, while legacy carriers often manage 9 to 11. A leased or owned plane costs the same parked or flying, so sweating the asset spreads fixed cost over more ASK and cuts CASK directly. In practice that means more hours per day and faster turnarounds, 25 to 35 minutes for an LCC. Utilisation is a cost-advantage lever.
- Ancillary revenue % is baggage, seat selection, priority boarding, food, change fees, as a percent of revenue. It's the LCC profit engine. Ryanair, Spirit, and IndiGo earn a large share of profit from ancillaries because base fares are competed to the bone. For a modern LCC, 10 to 20%+ of revenue is typical. A rising ancillary mix is usually a good sign that the carrier prices its extras with care.
Why can a full plane still lose money?
Load factor hides a trap. An LCC's breakeven load factor is the fullness at which unit revenue covers unit cost, and it's typically around 80 to 85%. It's the sector's most misunderstood number. It means an LCC has to fill ~4 of every 5 seats just to break even. Everything above that is profit and everything below is loss. It also means a high load factor is necessary but not sufficient. A carrier can fill 90% of seats and still lose money if it got there by cutting yields below the level that covers cost. That's red flag #1 in the airline red flags list: high load factor with falling yields = buying traffic with price. Always read load factor and yield together. RASK is the only summary of the two you can trust.