Things in the Sky

Well, it’s the beginning of the month, so that means August traffic results! A few airlines give revenue estimates, and on a PRASM basis, things are basically flat, or improving slightly:

It should all of these numbers of estimates provided by the carriers, except the June and July numbers for Continental, as it provides final numbers the month after the estimate.

But does PRASM (passenger revenue per available seat mile) really give us an indication of improving revenues? Yes and no, as while PRASM can certainly go up when revenues increase, it can also go up as load factor increases, as one way to calculate PRASM is multiplying yield by load factor.

(Click to enlarge)

I think that it’s safe to say here that adjustments in capacity helped boost PRASM so that it’s decrease was less than that in yield (passenger revenue per RPM). Note how that in the second quarter of this year, the decrease in RPMs was less than the decrease in ASMs, yielding a higher load factor. And there are two ways to increase load factor – increase passengers, or decrease capacity. Airlines across the industry have been increasing load factors with the latter.

So, in this case, an improvement in the decline in PRASM shows that Continental is doing a better job of handling capacity, but revenues in terms of yield still aren’t doing too hot. I think if we see an improvement in yields (and previous data shows that we could be hitting bottom), then it would be a good time to say that revenues are truly improving.

There will be more data coming soon that should shine more light on the revenue side of things. Later this month the ATA will release its monthly yield data, and in roughly a month’s time third quarter results will start coming in.