DEFINITION of Revenue Seat Miles
Revenue seat miles are the number of miles an aircraft flies in a flight segment multiplied by the number of passenger seats available for sale on that flight segment. This statistic indicates the aircraft's passenger carrying capacity. Revenue seat miles are more commonly referred to as available seat miles.
BREAKING DOWN Revenue Seat Miles
The revenue seat miles figure is a basic determinant of the production of a passenger aircraft. For example, if an aircraft has 200 seats available for sale, and it flies 500 miles in a given trip, it will have generated 1000 revenue seat miles. Importantly, only those seats that are available for sale are included in this calculation. Seats that are reserved for crew members or that were unavailable for sale due to mechanical problems, for example, are not included in the figure.
The Revenue Seat Miles Figure in Practice
Revenue seat miles are a component of one of the air transport traffic and capacity statistics that airlines must report to the government under section 298.61 of the U.S. Code of Federal Regulations. Section 298.61 of this Code requires that each commuter air carrier reports monthly and/or quarterly on their scheduled operations, including descriptions of the aircraft, passenger and cargo capacity of all scheduled services.
Revenue seat miles are also an important component in determining the profitability of an airline. Numerous bankruptcies and consolidations in the airline industry are a testament to the struggles faced by such airlines as Delta, American and Northwest. High operating costs for fuel, aircraft, gate fees, pension funds and union labor contracts plague the bottom line of the industry as a whole. In addition, air travel, in general, has high demand elasticity, meaning that even a small change in consumer incomes can have a large effect on the how many airline seats are sold. Because revenue seat miles measures the ability of a flight to generate revenue, it is an important figure in understanding the profit potential of a given flight for both investors and company management.
Investors, company management and federal regulators also keep track of other related measures of flight capacity and revenue generating ability. Related terms include revenue per available seat mile and revenue passenger mile. These more detailed revenue metrics can be compared to an airline's cost per available seat mile to determine the profitability of a given flight segment. Because these figures are reported to regulators periodically and available to the public, they are one input among many that can be used to gauge the profitability of the industry as a whole as well.