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How Do The Low Fares Work?  
User currently offlineBHXDTW From Eritrea, joined Feb 2005, 1090 posts, RR: 5
Posted (9 years 2 months 9 hours ago) and read 3711 times:

Hi all,
just a quick question I hope someone can answer...
Ive been asked lately by some friends travelling on Ryanair, how Low Cost airlines make a profit when they only charge £1.99 one way to places like Malmo, Rome, etc etc..
I know only a few seats on each flight are sold at the bargain basement fares such as above, but Im at a loss as to how to explain it...
Can someone give me an idea as to how these airlines do it ?!

cheers for any help,

Jordan  scratchchin 

21 replies: All unread, jump to last
 
User currently offlineStarlionblue From Greenland, joined Feb 2004, 17044 posts, RR: 67
Reply 1, posted (9 years 2 months 9 hours ago) and read 3701 times:

At an airport like Skavsta, the local authority will pay Ryanair a certain sum for each seat.


"There are no stupid questions, but there are a lot of inquisitive idiots."
User currently offline7LBAC111 From United Kingdom, joined Jul 2004, 2566 posts, RR: 35
Reply 2, posted (9 years 2 months 8 hours ago) and read 3687 times:

You're right - little if any money is made on seats at this price. The airlines hope to derive additional revenue and thus profuit from your friends buying ancillary products. Such as On-Board shopping, Insurance etc.

You find on FR that the prices for items from the onboard kiosk are astronomical. A lot of money is made here.

Also - the LCC's are so called for offering low fares initially but try to book some routes within a few days of departure and they are not always as attractively priced.

Hope that helps you a little. Hopefully someone else can add a little more to this.

Mark
7LBAC111



Debate is what you put on de hook when you want to catch de fish.
User currently offlineCornish From United Kingdom, joined Feb 2005, 8187 posts, RR: 54
Reply 3, posted (9 years 2 months 8 hours ago) and read 3684 times:

Quoting Starlionblue (Reply 1):
At an airport like Skavsta, the local authority will pay Ryanair a certain sum for each seat.

And at certain airports when the number of passengers Ryanair carries rises over a certain agreed number then they get even more money from the local authority/airport owner per passenger.



Just when I thought I could see light at the end of the tunnel, it was some B*****d with a torch bringing me more work
User currently offlineBHXDTW From Eritrea, joined Feb 2005, 1090 posts, RR: 5
Reply 4, posted (9 years 2 months 8 hours ago) and read 3679 times:

Quoting Cornish (Reply 3):
Quoting Starlionblue (Reply 1):
At an airport like Skavsta, the local authority will pay Ryanair a certain sum for each seat.

And at certain airports when the number of passengers Ryanair carries rises over a certain agreed number then they get even more money from the local authority/airport owner per passenger.

wow, I did not know this !!! Man Im slow !


User currently offlineZonky From New Zealand, joined Nov 2004, 432 posts, RR: 0
Reply 5, posted (9 years 2 months 8 hours ago) and read 3667 times:

£8 wheelchair surcharges also help.

A common tactic is not weighing/charging pax checked luggage on a outbound trip, but checking on the way back.


User currently offlineCornish From United Kingdom, joined Feb 2005, 8187 posts, RR: 54
Reply 6, posted (9 years 2 months 8 hours ago) and read 3667 times:

Quoting BHXDTW (Reply 4):
wow, I did not know this !!! Man Im slow !

Hey don't worry - not everyone knows this.

But do bare in mind it isn't the case for EVERY route/ airport. As 7LBAC mentions - there ar eplenty of other ways they make their money.

Also bare in mind that much of their success is down to their management of their costs - keeping it as low as possible.



Just when I thought I could see light at the end of the tunnel, it was some B*****d with a torch bringing me more work
User currently offlineBDKLEZ From Ireland, joined Jun 2005, 1735 posts, RR: 10
Reply 7, posted (9 years 2 months 8 hours ago) and read 3657 times:

It's primarily to do with cost-cutting "behind the scenes". You are correct when you say that only a few seats will be available at very low fares, the real saving are made in reducing overheads.

For example, when you fly with FR/U2/AB etc etc, the passenger makes the reservtaion, the passenger prints the itinerary/T's & C's etc. You do not need to call a reservation centre to ask a human being (who is being paid a salary) to do it for you.

Having generally only one single type of a/c reduces costs also, as engineers and crews do not need to be certified on different a/c types, therefore saving certfication, training etc.

They operate very short turn-around times, reducing any costs incurred whilst the a/c is on the ground. etc etc etc etc

I could go on, but I think you get the picture.



Trespassers will be shot; survivors will be shot again!
User currently offlineBHXDTW From Eritrea, joined Feb 2005, 1090 posts, RR: 5
Reply 8, posted (9 years 2 months 8 hours ago) and read 3618 times:

Yeah its starting to fit In nicely ...haha
So does this mean that Carriers like BA , EI , LH etc etc who do reduce there fares quite a lot, are making a loss ?? after all they must have higher overhead costs..


User currently offlineCornish From United Kingdom, joined Feb 2005, 8187 posts, RR: 54
Reply 9, posted (9 years 2 months 8 hours ago) and read 3603 times:

Quoting BHXDTW (Reply 8):
So does this mean that Carriers like BA , EI , LH etc etc who do reduce there fares quite a lot, are making a loss ?? after all they must have higher overhead costs..

Well carriers like BA do indeed struggle to make money on short haul routes, and do provide some cheap fares in economy (often as good as some of the low costs) but they offset this by making serious money from their business class cabins and particularly on long haul. Also cargo can be a serious money earner for many traditional airlines at present too.

Don't forget the likes of BA and LH can also make money on other areas such as 3rd party maintainance and so on.



Just when I thought I could see light at the end of the tunnel, it was some B*****d with a torch bringing me more work
User currently offline7LBAC111 From United Kingdom, joined Jul 2004, 2566 posts, RR: 35
Reply 10, posted (9 years 2 months 8 hours ago) and read 3596 times:

Quoting BHXDTW (Reply 8):
So does this mean that Carriers like BA , EI , LH etc etc who do reduce there fares quite a lot, are making a loss ??

AFAIK BA are losing money on many short haul and domestic services - it's their longhaul stuff which is profitable. SO yes - when BA and the like offer cheaper prices, they are losing some revenue but in the hope of stimulating the market.

EI have succesfully moved to the Lowcost model and are doing quite nicely now, with their longhaul stuff remaining profitable (I think?)

LH - I know nothing.

7LBAC111



Debate is what you put on de hook when you want to catch de fish.
User currently offlineBHXDTW From Eritrea, joined Feb 2005, 1090 posts, RR: 5
Reply 11, posted (9 years 2 months 8 hours ago) and read 3587 times:

Thanks for that 7LBAC111...
 bigthumbsup 


User currently offlineCornish From United Kingdom, joined Feb 2005, 8187 posts, RR: 54
Reply 12, posted (9 years 2 months 8 hours ago) and read 3574 times:

Quoting BHXDTW (Reply 11):
Thanks for that 7LBAC111...

Oi I got there first !!  Wink



Just when I thought I could see light at the end of the tunnel, it was some B*****d with a torch bringing me more work
User currently offline7LBAC111 From United Kingdom, joined Jul 2004, 2566 posts, RR: 35
Reply 13, posted (9 years 2 months 8 hours ago) and read 3563 times:

Quoting Cornish (Reply 12):
Oi I got there first !!

You did Pat. You beat me by 1 min 44 seconds.
I shall suggest deletion ... lol.  sarcastic 

Mark
7LBAC111



Debate is what you put on de hook when you want to catch de fish.
User currently offlineCornish From United Kingdom, joined Feb 2005, 8187 posts, RR: 54
Reply 14, posted (9 years 2 months 8 hours ago) and read 3554 times:

Quoting 7LBAC111 (Reply 13):
You did Pat. You beat me by 1 min 44 seconds.
I shall suggest deletion ... lol.

Got to get up early in the morning to beat me Mark.
(Better to do so the night before!) Big grin



Just when I thought I could see light at the end of the tunnel, it was some B*****d with a torch bringing me more work
User currently offlineJush From Germany, joined Apr 2005, 1636 posts, RR: 3
Reply 15, posted (9 years 2 months 8 hours ago) and read 3527 times:

Quoting Cornish (Reply 9):

Don't forget the likes of BA and LH can also make money on other areas such as 3rd party maintainance and so on.

I can second that for LH. They have quite a lot of 3rd party maintenance contracts. Where they provide maintenance and staff for other airlines and/or train maintenance staff.



There is one problem with airbus. Though their products are engineering marvels they lack passion, completely.
User currently offlineAdria From , joined Dec 1969, posts, RR:
Reply 16, posted (9 years 2 months 7 hours ago) and read 3506 times:

Well when I booked a flight with Easyjet the price was not any different from the one our national carrier offers. Sadly they were full on that day so now I going to fly on a cramped seat to London Stansted instead of Gatwick and the price is almost the same Sad. so no low fare here

User currently offlineBDKLEZ From Ireland, joined Jun 2005, 1735 posts, RR: 10
Reply 17, posted (9 years 2 months 7 hours ago) and read 3463 times:

Quoting Adria (Reply 16):
Well when I booked a flight with Easyjet the price was not any different from the one our national carrier offers

Don't forget, low-cost doesn't refer to low fares....



Trespassers will be shot; survivors will be shot again!
User currently offlineBHXDTW From Eritrea, joined Feb 2005, 1090 posts, RR: 5
Reply 18, posted (9 years 2 months 7 hours ago) and read 3478 times:

Quoting Adria (Reply 16):
Well when I booked a flight with Easyjet the price was not any different from the one our national carrier offers. Sadly they were full on that day so now I going to fly on a cramped seat to London Stansted instead of Gatwick and the price is almost the same . so no low fare here

Yeah I know .. I flew to DUB on EI for cheaper than FR from BHX !! bonus !!.. well, I thought it was as I had an assigned seat, and I think the EI crew can be really pleasant.


User currently offlineA350 From Germany, joined Nov 2004, 1100 posts, RR: 22
Reply 19, posted (9 years 2 months 4 hours ago) and read 3379 times:

Quoting BHXDTW (Thread starter):
Ive been asked lately by some friends travelling on Ryanair, how Low Cost airlines make a profit when they only charge £1.99 one way to places like Malmo, Rome, etc etc..

They don't make profits with such fares! The average fare of Ryanair , i.e. what the average passenger has paid, is at approx. 30-50€ one way. These extremely low prices have two other reasons: one is that they just sell overcapacity at times where nobody wants to travel (instead of flying empty seats as the legacies) and the other reason are advertising campaigns. Do a dummy booking at FR and compare the fares for 5pm at Friday and 5am at Tuesday!

A350



Photography - the art of observing, not the art of arranging
User currently offlineWindowSeat From United States of America, joined Sep 2003, 1312 posts, RR: 57
Reply 20, posted (9 years 1 month 4 weeks 1 day 20 hours ago) and read 3282 times:

Quoting Zonky (Reply 5):
A common tactic is not weighing/charging pax checked luggage on a outbound trip, but checking on the way back.

Sneaky! Even if the practice does exist I doubt it is anywhere on paper. The media would have a field day at this.

cheers



I'm all in favour of keeping dangerous weapons out of the hands of fools. Let's start with keyboards.
User currently offlineJetdeltamsy From United States of America, joined Nov 2000, 2987 posts, RR: 8
Reply 21, posted (9 years 1 month 4 weeks 1 day 18 hours ago) and read 3216 times:

Quoting A350 (Reply 19):
other reasons: one is that they just sell overcapacity at times where nobody wants to travel (instead of flying empty seats as the legacies)

They sell these seats at bad times and into airports that are sometimes far from the city. There are a few drawbacks with Ryanair. But if you can travel "their way", you can save a bundle.

And yes, it's the overcapacity that they're selling on the cheap. They are still selling seats at regaular fares for these flights. They have it down to a science.



Tired of airline bankruptcies....EA/PA/TW and finally DL.
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