What Does Cost Per Available Seat Mile Mean?
Cost per available seat mile (CASM) is a common unit of measurement used to compare the efficiency of various airlines. It is obtained by dividing the operating costs of an airline by available seat miles (ASM). Generally, the lower the CASM, the more profitable and efficient the airline.
Understanding Cost Per Available Seat Mile (CASM)
Cost per available seat mile (CASM) is usually a more comprehensive measurement of airline costs, but it's still important that investors are aware of what items comprise this measurement. Many carriers exclude fuel costs from operating expenses, making the CASM an unreliable metric. Cost per available seat mile, as the name suggests, reflects the costs incurred by an airline to fly a single seat one mile.
A natural extension of CASM is RASM, or revenue per available seat mile, which helps facilitate a revenue to expense comparison, particularly helpful when comparing rival airlines or results to a benchmark.
More general, the available seat mile, or ASM, tends to be the preferred measure of capacity within the airline industry. This metric is found by multiplying the number of seats on each plane by the number of miles that plane flies during a particular period of time (such as a month, quarter, or year) and summing up the results. Hence, an airline with a single plane of 170 seats that travels 4,500 miles per day is generating 765,000 ASMs each day.
There are numerous capacity measures available, such as the number of flights or the total number of seats on each flight, but neither is as effective for comparative purposes as ASMs. For example, tallying the total number of flights does not differentiate between a 50-seat plane and a 500-seat plane, and counting the number of seats on each flight treats a 700-mile flight the same as a 5,000-mile flight.