Load Factor

There's probably a joke to be made here that doesn't involve a baby's bodily functions. We sure can't think of one...so, for now, we're just going to move on.

In general, the term "load factor" means something like "how much you use something's full capacity." If you used that treadmill you bought once for a 20-minute jog, and now it's been sitting there as an overpriced clothes hanger for a year, then it has a load factor of something like 0.00003%.

In business, it comes up a lot in two key contexts. One is electric utilities. Load factor represents the average amount of electricity used versus the maximum amount possible.

A utility has peak demand of 500 kW. Meanwhile, its average load is 50,000 kW a month. Multiply the peak load by the 30 days in the month, and you get 15,000. Divide that by the average monthly load. Load factor = 30%.

The other common usage relates to airlines. One of the key metrics for the financial health of an airline is its load factor, or how full its planes are. A load factor of 75% would imply that, on average, each flight the company runs has 75% of its seats full. And yet, we don't recall ever being on a plane that wasn't 100% packed.