Aviation
Break-even load factor
The load factor at which revenue exactly covers costs at current fares.
Last reviewedWhat does Break-even load factor mean?
The break-even load factor is the share of seats an airline must fill to cover its costs at its current fares. Counting passenger revenue only, break-even load factor = CASK / yield; ancillary revenue lowers it. Example: with a CASK of 0.07 and a yield of 0.08, the airline must fill 0.07 / 0.08 = 87.5 percent of seats to break even on ticket revenue. If its actual load factor is 85 percent, it loses money on tickets alone. IATA, the global airline association, regularly reports the industry's break-even load factor next to its actual load factor, and the gap is usually only a few points, which is why airline profits are fragile.
Where does it come up in case interview prep?
Related terms
- Load factorThe share of seats filled with paying passengers: RPK divided by ASK.
- CASK (cost per available seat kilometre)Total airline operating cost divided by ASKs.
- Yield (airlines)Passenger revenue per revenue passenger kilometre: the average fare per kilometre.
- BreakevenThe volume or revenue at which profit is exactly zero.
- ASK (available seat kilometre)One seat flown one kilometre: the standard measure of airline capacity.
- RPK (revenue passenger kilometre)One paying passenger flown one kilometre: the standard measure of airline traffic.
- RASK (revenue per available seat kilometre)Total airline revenue divided by ASKs.
- Fuel hedgingLocking in the price of part of future fuel to reduce the risk of price swings.