Cost Per Available Seat Mile (CASM)

What Is Cost Per Available Seat Mile?

Cost per accessible seat mile (CASM) is a common unit of measurement used to compare the productivity of different airlines. It is gotten by separating the operating costs of an airline by available seat miles (ASM). Generally, the lower the CASM, the more profitable and efficient the airline.

Grasping Cost Per Available Seat Mile (CASM)

Cost per accessible seat mile (CASM) is typically a more extensive measurement of airline costs, yet it's as yet important that investors are aware of what things include this measurement. Numerous transporters reject fuel costs from operating expenses, making the CASM an inconsistent measurement. Cost per accessible seat mile, as the name recommends, mirrors the costs incurred by an airline to fly a single-seat one mile.

A natural extension of CASM is [RASM, or revenue per accessible seat mile](/revenue-per-accessible seat-mile-rasm), which works with a revenue to expense comparison, especially supportive while contrasting rival airlines or results with a benchmark. Different methods of ascertaining an airlines cost to fly incorporates taking a gander at cost or revenue miles per passenger or per ton of fuel.

Accessible Seats

More broad, the available seat mile, or ASM, will in general be the preferred measure of capacity inside the airline industry. This measurement is found by increasing the number of seats on each plane by the number of miles that plane flies during a specific period of time (like a month, quarter, or year) and summarizing the outcomes. Consequently, an airline with a single plane of 170 seats that movements 4,500 miles each day is generating 765,000 ASMs every day.

There are various capacity measures accessible, like the number of flights or the total number of seats on each flight, however nor is as effective for comparative purposes as ASMs. For instance, counting the total number of flights doesn't separate between a 50-seat plane and a 500-seat plane, and counting the number of seats on each flight treats a 700-mile flight equivalent to a 5,000-mile flight.

Model: Southwest Airlines

Southwest Airlines (NYSE: LUV) is a regional airline in the U.S. known for its straightforward yet low-cost flights. It's ticket prices are low since Southwest has a low operating cost structure. As a matter of fact, its management states that unit costs are among the lowest in the industry. in light of CASM.

We should take a historical model: After posting a CASM of 12.5 pennies in 2014, the airline managed to shrink that to 11.48 pennies last year. This allows the company to profit even as it offers low fares to its customers. The figure is additionally lower than its major rivals. For example, operating expense per ASM was 15.15 pennies for the principal quarter of 2018 for American Airlines. At Delta Airlines, the figure was 15.07 pennies for the fourth quarter of 2017. With United, its CASM for 2Q 2018 was 13.08 pennies.

Features

• Cost per accessible seat mile (CASM) is a widely utilized unit of measurement to compare the productivity of different airlines.
• CASM isolates an airline's operating costs by ASM to get the cost to fly a single seat by one mile.
• Accessible seat miles (ASM) alludes to the number of seats on a plane on a given route that are really accessible for purchase on an airline.
• Since CASM rejects several important non-operating expenses, it isn't as dependable a figure as one would want.