This document discusses using cost per available seat kilometer (CASK) and revenue per available seat kilometer (RASK) to evaluate the profitability of low-cost carriers like Norwegian. It presents a mapping table analyzing profits and losses across a range of CASK and load factor values. The analysis finds that with Norwegian's 2017 CASK of $0.05 per seat kilometer and 86.1% load factor, the airline is profitable, generating over $800,000 in profits. The mapping table is described as a powerful tool for airlines to clearly understand their financial situation based on costs and performance metrics.

1. Is Low Cost Carrier Profitable? Issue No. 1
Case Study : Norwegian
By :
Mohammed Salem Awad
Aviation Consultant
It is well known that the margin of the profit in the
airline industry is very tight, then how low cost
carriers create a profit ?
In the recent years, many of airlines announced
their bankruptcy, they are out of their liquidity and
cash flow. Some of them survived by the support of
the governments. But without getting a clear picture
of the financial situation of the airline, the airline
will still suffering from the hidden cost that are
bleeding and not realize by the top management.
While IATA published a most wonderful chart
concerning CASK and RASK for most airlines.
Which shows the margin of the profits in airline
industry.
So what is the right solution to define the situation
of the airline, without practicing trails to fit.
Based on airline strategy, (here hub and spoke) Airline can be define by four main factors
1- The Market Size (in terms passengers flow)
2- Applicable Market Fare
3- Distance between cities (Origins and destinations)
4- Cost of operation ( define by unit cost known as CASK)
While the following equation explore the relations these factors
For theoretical model we can refer to the following link
https://www.slideshare.net/wings_of_wisdom/allocate-right-aircraft-capacity
but we will not use it in this study.

2. 2 2
CASK Evaluation:
CASK which is stand for Cost per Available Seat
Kilometer, it is globally used in Aviation industry,
it is reflect the cost supply in service production
system, as Airlines. The CASK for Low Cost
Carriers from 0.04 – 0.08 USD/ASK (Blue Dots),
with respects Average Trip Length (Stage Length)
CAPA source.
While IATA published a world graph representing
CASK and RASK (Revenue per Available Seat
Kilometers ) – at IATA Economics Chart of the
Week.
So at a breakeven level, RASK equal CASK
These two terms governed the airline network that
utilize the concept of Origin and Destination
system. The dot red line shows the level of unit
cost equal unit revenue. While the size of the dots
represent by total revenue.
The aim of defining Norwegian CASK, is to
positioning the size of aircraft used by Airline
with respect to applicable load factor that
represents / results 72 destinations (LGW hub)
According to the bar chart by Norwegian, the
CASK of the airline at 2017 was 0.05 USD/ASK.
.
Inputs:
Norwegian – Case Study
Market Size – Demand Passenger which related
to number of Frequency here, Passengers
for each routes can be collected from
Eurostat web site form LGW i.e. 72 Sector
– Norwegian UK – Network.
Applicable Fare – which is impact on the Size
(capacity) of Aircraft.
Distance between Airports : it is almost fixed figure, when but we come to design a network, we
have to decide whether we need to operate short, medium or long-haul operation.
Cost : it is well known cost parameter define a term CASK ( cost per available seat kilometer )
from 0.01 to 0.1 USD, used as step function to develop a mapping table for airline (Cask,
Load Factor, and Profit).

3. 3 3
In case of Norwegian –
Number of Routes = 72,
Aircraft type : Boeing 737Max
Aircraft Capacity : 189 seats
Applicable Market Fare from website.
Norwegian Load Factor : 86.1% (at 2019)
Operation : one way
Frequency: one ( 1 )
Analysis: (mapping table)
Construct the first data analysis table at Cask =0.01
and load factor = 0.1 to get the final results either
profits or losses for the whole network. Here it is
profit = 12,832 USD per network.
Repeat this calculation, i.e 100 times for different
levels for load factors and the corresponding values
of Casks.
Results :
We get a Mapping Table for Profits/Losses. Profits
at a Green Regions, and Losses at Red Regions.
Mapping Table:
Positioning Norwegian :
Norwegian is defined by it CASK = 0.05 USD and Load Factor = 0.86
From mapping table at CASK (0.05) :
Profit at Load Factor 0.80 = 728,409 USD
Profit at Load Factor 0.90 = 949,825 USD
Profits at load Factor 0.86 = 861,258 USD
Conclusions :
Mapping table is a powerful tool for airlines, its gives a clear picture for the airline situation in
terms of performance (Load Factor) and cost (CASK) to define either it is profitable or not.
In this study Norwegian is a Profitable Airline.
Profits
Losses