One airline seat available for sale and flown one mile equals one available seat mile (ASM) in the airline industry. A primary measure of system capacity for passenger travel in the aerospace sector, ASMs represent the maximum amount available of a potentially revenue-producing product.

Investors often compare ASMs with revenue passenger miles (RPMs), the corresponding measure of production. Where ASMs consider open seats, RPMs consider the seats per mile occupied by paying passengers, but they do not take into consideration how much each passenger paid. Dividing the RPMs by the ASMs calculates the load factor, the percentage of potentially occupied seat miles that are actually occupied by paying passengers, one key indicator of an airline's operational health.

As an example, if an airplane has 100 seats available for sale and flies 500 miles, the total available seat miles for that flight equals 100 seats times 500 miles, resulting in 50,000 ASMs. If passengers occupy 80 of the 100 seats, the total revenue of passenger miles equals 80 times 500 miles, resulting in 40,000 RPMs and a load factor of 0.8 (40,000/50,000).

A particularly useful metric when examining capacity on a systemic basis, ASMs take into account both open seats and flight distance and therefore automatically give more weight to long-haul flights versus short-haul flights. However, neither the type of seat nor the potential amount of revenue per seat factors into calculating ASMs. The best seat in first class and the middle seat at the back are treated the same by this measure.

Investors also use cost per ASM when considering an airline's efficiency. According to research at the Massachusetts Institute of Technology, cost per ASM ranged from 10.33 to 13.87 cents per mile for major U.S.-based airlines in 2013. Lower costs per ASM suggest efficient operations.

For more on this topic, check out The Industry Handbook: The Airline Industry.

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