What is a 'Revenue Passenger Mile - RPM'

A revenue passenger mile (RPM) is a transportation industry metric that shows the number of miles traveled by paying passengers and is typically an airline traffic statistic. Revenue passenger miles are calculated by multiplying the number of paying passengers by the distance traveled. For example, an airplane with 100 passengers that flies 250 miles has generated 25,000 RPM.

BREAKING DOWN 'Revenue Passenger Mile - RPM'

Revenue passenger miles are the backbone of most transportation metrics. RPM is often compared to available seat miles (ASM), a measure of total capacity. By dividing RPM by ASM, an airline can calculate load factors. Higher load factors, obviously, are desired because empty seats are an opportunity cost for an airline.

The Department of Transportation's (DOT) Bureau of Transportation Statistics maintains datasets of aggregate RPM as well as ASM for domestic and international flights. For October 2017 domestic RPM was 58.2 billion against 68.3 billion ASM, which translated into a load factor of 85.2%. International RPM and ASM during the month was 23.4 billion and 29.3 billion, respectively, for a load factor of 79.9%. RPM shows traffic volume, but it goes hand-in-hand with ASM to give airline management critical data about how many seats it must fill to achieve greater profitability.

Airline RPM Reporting

Airlines report RPM statistics on a monthly and year-to-date basis. Three of the largest U.S. carriers each had over 100 billion RPM in the first half of 2017. American Airlines recorded 110.5 RPM, Delta Airlines registered 105.5 RPM, and United Airlines had 104.0 RPM. In conjunction with the ASM data, it was demonstrated that Delta was the most efficient in loading its fleet during that six-month period. Delta's load factor was 85.0%, higher than United's 81.8% and American's 81.2%.

RPM Around the World

As more people take to the skies to travel within their own countries and to foreign lands, RPM (or RPK for countries on the metric system) will only grow. This is especially true for developing nations that are just beginning massive build-outs of their airport infrastructure to keep pace with their economic growth rates. This airline traffic statistic will help governments plan airport capacity and slots for individual airlines. Aircraft makers, led by the duopoly of Boeing and Airbus, keep an eye on the longer-term trends in RPM to plan their future production of planes. Whether based in Asia, Europe, Latin America or Europe, airline companies need to compile this key traffic volume statistic to assist in their forward business strategies to attract passengers in the intensely competitive market.

RELATED TERMS
  1. Revenue Per Available Seat Mile ...

    Revenue Per Available Seat Mile is a unit of measurement used ...
  2. Transportation Sector

    The transportation sector consists of companies that provide ...
  3. Transferable Points Programs

    With transferable points programs, customers earn transferrable ...
  4. Load Spread Option

    A method of collecting the annual fees from investors in load ...
  5. Transportation Expenses

    Transportation expenses are costs incurred by an employee or ...
  6. Load

    A load is a sales charge commission charged to an investor when ...
Related Articles
  1. Insights

    American Airlines Updates Q4 Guidance, Announces November Traffic (AAL)

    American Airlines issued a press release detailing its November 2016 traffic performance. The airline also revised its Q4 guidance.
  2. Investing

    Southwest Airlines Load Factor Hits Record High (LUV)

    On July 8th, Southwest Airlines (NYSE: LUV) updated shareholders on flight activity in the month of June -- and the news was good. Southwest airplanes carried passengers a total of 10.8 billion ...
  3. Insights

    Falling Prices, Revenue Hit Airlines

    2016 has been a tough year for U.S. airlines with overcapacity and falling prices.
  4. Investing

    Analyzing Southwest Airlines' Market Share (LUV)

    Learn about how Southwest Airlines has grown and continued to operate profitability despite being in a notoriously volatile and economically sensitive industry.
  5. Retirement

    Is Delta Stock Suitable for Your IRA or Roth IRA? (DAL)

    Learn about Delta Airlines and the factors that affect the company's performance. Discover if Delta stock makes an appropriate investment for IRA accounts.
  6. Personal Finance

    The 5 Smartest Ways To Use Your Airline Miles

    How to travel and save money by using airline miles.
  7. Investing

    American Airlines Trades Ex-Dividend Wednesday (AAL)

    The company is adjusting to an environment where there are more seats available across the industry than demand, which forces airliners to cut prices.
  8. Investing

    Frequent Flyer Miles, the Hidden Lynchpin of Airline Sector

    Analysts at Stifel argue that frequent flier programs are secretly generating big, reliable profits across airlines.
  9. Financial Advisor

    The Incredible Shrinking U.S. Airline Industry

    The U.S. hasn’t had a new scheduled passenger airline since 2007. Some blame a lack of financing while others say government approval has gotten too tough.
  10. Insights

    Spirit Releases 2016 Traffic Results (SAVE)

    Shares in Spirit are up 50 percent since January 2015. On Jan. 10, the airline released its December and its 2016 operational results.
RELATED FAQS
  1. How can I use the load factor as an indicator for the profitability of the airline ...

    Learn more about how investors and airlines use load factor. Find out about some of the major expenses of airlines and how ... Read Answer >>
  2. Is the airline industry an oligopoly?

    Has the air line industry become an oligopoly? Lean about the changing regulations, the history of the airline industry and ... Read Answer >>
  3. What does it mean when airline revenues are adjusted for air traffic liability?

    Understand how the accounting method used by airlines requires them to adjust revenues for air traffic liability and when ... Read Answer >>
  4. How does government regulation impact the aerospace sector?

    Learn more about how government regulation impacts airlines and aerospace manufacturers. Find out how American deregulation ... Read Answer >>
  5. Why are most airplane tickets nonrefundable?

    Discover why most airline tickets are nonrefundable. Learn how this practice is a big revenue generator for major airlines. Read Answer >>
  6. To what extent will changing fuel costs affect the profitability of the airline industry?

    Learn how changing fuel costs affect the profitability of the airline industry and why airline operators do not immediately ... Read Answer >>
Hot Definitions
  1. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  2. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  3. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  4. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  5. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
  6. Hedge Fund

    A hedge fund is an aggressively managed portfolio of investments that uses leveraged, long, short and derivative positions.
Trading Center