bhxdtw
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How Do The Low Fares Work?

Tue Jul 26, 2005 11:52 pm

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 
 
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Starlionblue
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RE: How Do The Low Fares Work?

Tue Jul 26, 2005 11:55 pm

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." - John Ringo
 
7LBAC111
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RE: How Do The Low Fares Work?

Tue Jul 26, 2005 11:56 pm

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
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cornish
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RE: How Do The Low Fares Work?

Tue Jul 26, 2005 11:57 pm

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
 
bhxdtw
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RE: How Do The Low Fares Work?

Tue Jul 26, 2005 11:59 pm

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 !
 
zonky
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:02 am

£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.
 
cornish
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:02 am

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
 
BDKLEZ
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:03 am

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.
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bhxdtw
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:18 am

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..
 
cornish
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:22 am

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
 
7LBAC111
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:24 am

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.
 
bhxdtw
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:26 am

Thanks for that 7LBAC111...
 bigthumbsup 
 
cornish
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:30 am

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
 
7LBAC111
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:33 am

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.
 
cornish
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:36 am

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
 
jush
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:51 am

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.
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Adria
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 1:03 am

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
 
BDKLEZ
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 1:43 am

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!
 
bhxdtw
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 1:44 am

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.
 
A350
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 4:32 am

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
 
WindowSeat
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 12:05 pm

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
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jetdeltamsy
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RE: How Do The Low Fares Work?

Wed Jul 27, 2005 2:00 pm

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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