Airline Revenue Structure

The airline generates its revenue from various sources that can be categorised and divided from flying activities (Passengers, Freight, Code share, Mail, Excess baggage & Courier, Charter operations, On-board duty-free sales, On-board meals, beverages, entertainment, comfort, etc) and servicing activities (Engineering and Maintenance, Catering, Ground Handling, Warehousing, Training Travel and Tour sales, Leasing income, Other revenues). Those mix of revenues would help the airline reduce the impact of external shocks or economic fluctuation. For example, during the SARS outbreak, the freight revenue was less affected than the passenger revenue, therefore, the airline can maintain its revenue. Generally, over 80% of revenue is derived from passenger and freight operations.

In the other hand, there are two components in the revenue, price and volume. The positive or negative changes of those two components may affect the revenue (both passenger and freight revenue) in the same way. For example, the revenue would increase as well as the number of available seats per flight or the airfare increases. And because of such relationship between the revenue and the two factors: volume and price, Yield is taken to measure the quality of revenue received per unit of traffic uplifted. Where yield is expressed as:

• Passenger yield: cents per RPK (c/RPK) or cents per ASK (c/ASK).

• Freight yield: cents per RFTK (c/RFTK) or cents per AFTK (c/AFTK).

Probably, yield is among the most quoted performance indicators, along with seat factor (SF), within the airline industry. In general, if both seat factor and yield rises together, it states that the airline is going well (which means more spaces are used and more revenue is earned).