Transcript Slide 1

American Airline Cost and
Productivity Analysis
Samira Monshi
Question 3
• American is a Network Legacy Carrier(NLC)
– It is operating large hub-and-spoke networks.
– It is covering regional, domestic and international
services.
– Has different types of aircraft
– Has premium class
– Has labor unions
Question 2
•
RPM
– One paid passenger flown one mile.
–
•
ASMs
– One aircraft seat flown 1 mile.
–
•
•
•
•
•
•
•
∑ i (Number of Passengers (Flight i) * Distance Flown (Flight i)
∑ i (Number of seats (Flight i) * Distance Flown (Flight i)
RASM (Unit Revenue)
– Total revenue/ASM
CASM (Unit Cost)
– Total operating cost/ ASM
Yield
– Average Fare paid by passenger per mile flown. Total revenue/ RPM
PRASM
– total passenger revenue/ASM
Fuel Consumed
– Total amount of fuel used per block hour
Fuel Costs per ASM
– Total fuel cost /ASM
Non-Fuel Costs per ASM:
– (Total Expenses-fuel cost)/ASM
Chart 1
60000
0.9
0.8
50000
0.7
40000
0.6
proportion
of
consumed
0.4
output
(RPM/ASM)
0.3
0.5
outputs(ASM)
30000
/Pax trafic (RPM)
20000
0.2
10000
0.1
RPM
0
0
123412341234123412341234123412341234
2001
2002
2003
2004
2005
2006
Quarters 2001-2009
2007
2008
2009
• RSM and Load factor increase and decrease with oscillation of
ASM.
•If the airline increases the ASM demands (RPM) is also increasing.
• ASM, RPM and Load Factor increase in Q2 and Q3 each year.
ASM
Load factor
Chart 2
14000
12000
10000
8000
6000
Total Operating Revnues
$/block hour
Total Operating Expenses
4000
Income (Loss) Before Taxes
2000
0
123412341234123412341234123412341234
-2000
-4000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Quarters 2001-2009
•Total revenue and total operating cost have the same pattern.
•From 2002 Revenue and Operating Cost increase.
•Income before taxes is unpredictable.
Chart 3
18
16
14
12
RASM (¢/ASM)
10
CASM (¢/ASM)
8
Yield(¢/RPM)
6
PRASM (¢/ASM)
4
2
0
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2001
2002
2003
2004
2005
2006
Quarters 2001-2009
2007
2008
2009
•During 2003-2005 Revenue decreases that leads to decreasing in
RASM and PRAZM.
•CASM has bean oscillating with substantially large peaks in 2001
and 2008.
Chart 4
6000
1400
1200
5000
1000
$/block hour
4000
800
3000
Gallon/block hour
600
2000
400
Aircraft Fuel Operating Cost
1000
200
Non-fuel Operating Cost
Fuel Gallons Consumed
0
0
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2001
2002
2003
2004
2005
2006
Quarters 2001-2009
2007
2008
2009
•Fuel Cost starts increasing from 2002 and reaches to the max
amount in 2008.
•Non- fuel has the same behavior. ( probably influenced by fuel cost)
•Fuel consumption decrees gradually.
Chart 5
0.14
4
0.12
3.5
3
0.1
$/block Hr*ASM
2.5
0.08
2
0.06
$/ Gallon
1.5
0.04
1
0.02
0.5
0
0
123412341234123412341234123412341234
2001 2002 2003 2004 2005 2006 2007 2008 2009
Quarters 2001-2009
Fuel Operating Expences per ASM
Non-fuel Operating Expences per
ASM
Jet Fuel Price
•As Jet Fuel Prices and cost per ASM are oscillating in the same
pattern with a max peak in 2008
•Non- fuel Costs is also influenced by 2008 recession.
Question 4
• a. Fuel Prices on Expenses (Chart 5, 4, 3)
– Fuel price can affect the total operating cost directly
and Non- operating cost indirectly.
• b. Fuel prices on Airline Finance (Chart 2)
– It has influence on the total operating cost that lead
to changes in income before tax.
• c. Fuel Prices on Airline Network Structure (Chart 1)
– High fuel price leads airlines to increase their Load
factors in order to make sure they do not use fuel for
an empty seat.