Revenue and cost per passenger mile are two key performance metrics fo

QUESTION

Revenue and cost per passenger mile are two key performance metrics for the airline industry. Do a small research online and summarize in 150 words the importance of the measures and their values for some of airlines.
Revenue measures how much an airline takes in. This is perhaps the single most critical performance metric, as it measures how much the company is making. Measuring the effectiveness of advertisements and promotions and indeed, even the success of the industry and economy as a whole hinges on the single measure of revenue. Cost per passenger, however, is an integral component of revenue. If allocated correctly, airlines can set the cost per passenger such that it is price unit elastic. This means that even if fewer passengers decide to fly be it for reasons of safety (think September 12, 2001), reasons of cost (think the

2008 recession) or simply reasons of bad weather (few would want to fly to New Orleans during a hurricane), unit elastic prices compensate for fewer customers by costing each individual customer more, resulting in no net difference to revenue. However, if cost per passenger increases while passenger numbers decrease and the price is unit elastic, profits increases, since less cost is being subtracted from the revenue.

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