Winners play the odds. During a recent discussion with a friend of mine who is the Travel Manager for a large corporation we agreed that yield is a superior metric. Naturally the next topic was how do you explain it to people?

Simple – Yield is more flexible and offers more information faster.

Average Ticket Prices (ATP) should only be used to evaluate pricing or cost performance in a single market. Ticket prices can be used to compare airlines against one another in one Origin and Destination (O&D) market or for timescale comparisons on a route (y-o-y / qtr-o-qtr / m-o-m). Average Ticket Prices should not be used to compare aggregated markets. An example would be the average price between Boston and several European cities: London, Paris, Frankfurt. You could show the 2012 ATP is $2,300, while in 2011 it was $2,000 – a 15% increase, but you still need to break it down. What if the ATP is driven by increases in the London market, while the Frankfurt and Paris markets declined. On a absolute basis, the London flight might still be cheaper than the longer flights to Paris or Frankfurt. Average Ticket Price comparisons require more anchors – you need to be familiar with far more prices and it still doesn’t give you enough information to know if your preferred carriers are offering a good deal. In this case, the change (increase or decrease) is the meaningful number not the price.

Yield is superior to average ticket price because it allows meaningful comparisons between O&D’s of different lengths and it produces fewer decision errors when markets are grouped.  Yield is the primary metric PRISM users apply to market strategies since it  reduces the number of marginal flights when you’re evaluating a large data-set. Specifically, average ticket price (ATP) is very sensitive to context (cabin and distance), while yield is less sensitive to distance since the number is derived by dividing the ATP by the flight’s distance. In domestic terms once a sales manager removes East coast shuttle markets (the bulk of those marginal, yield-skewed flights), it’s much easier to build a US domestic to domestic term and assign reasonable share goals. Like ATP, Yield comparisons should be reported at the cabin level since there will be large differences across cabins.

An example. A yield comparison between Boston->London and Boston->Paris might show both markets ‘cost’ $.60 per mile for business class, while the coach fare was $.25 per mile. Given the same yield, the Average Ticket Prices between both cities would be higher on the longer haul market – Paris. Therefore, it’s yield that shows you quickly that you have equitable contracts – not price.

I still like Average Ticket Prices, I just don’t think they win as often.