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hOMSaR
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Re: How does United make money on airfares less than $100?

Fri Jul 05, 2019 6:26 am

kiowa wrote:
fjhc wrote:
I've got return flights LHR-ORD (outbound via BRU, return direct) with United and Brussels Airlines (for the LHR-BRU segment) for £259. The 'fare' was apparently $13, with the rest being taxes and fees. This is basic economy, no bag, but still. Crazy cheap. I'm fully expecting a terrible seat (although, having a UA frequent flyer account I'm hoping they'll take my preferences into account), but for that sort of money, trans-Atlantic with a real airline where I'll get IFE, food, etc I'm very happy. I do not expect them to make a profit at all. Especially when £78 worth of those taxes and fees are just the UK's Air Passenger Duty!


It is sad when the governments extort more in taxes than the airline collects for doing the work.


“Taxes and fees.” A lot of fees (especially transatlantic) are actually fees the carrier itself imposes (like the “resort fee” at certain hotels).
The plural of Airbus is Airbuses. Airbii is not a word.
There is no 787-800, nor 787-900 or 747-800. It's 787-8, 787-9, and 747-8.
A321neoLR is also unnecessary. It's simply A321LR.
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Shrewfly
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Re: How does United make money on airfares less than $100?

Fri Jul 05, 2019 7:30 am

Dieuwer wrote:
Shrewfly wrote:
Often cheap fares are there to fill seats that otherwise would be empty. A commuter flight between two cities at a premium time might be full, but the aircraft needs to make a return trip, so sell seats off cheap on the return leg means you at least get some return. A cheap seat on a flight at an unpopular time, might persuade some passengers with flexible schedules to book those, freeing up the more expensive seats on earlier flights.

Also not everyone on the aircraft is paying that. I have flown MAN-DUB on a flight and paid very little because I booked it in advance. My colleague ended up having to come with me at short notice, and our employers had to pay 5 times for him, as he could only book it the night before.


If seats go otherwise empty, then maybe there is too much capacity. :idea:


Different times and different dates can make capacity hard to predict though, and some airlines only have limited choices of aircraft meaning capacity is pretty much fixed.
Ryanair for example are only ever going to be able to send that 737 with its 180+ seats. On some days you might be able to fill it easily at top price one way, but that plane still needs to come back, and unless you lower the price, the demand for the return flight might be so low you'd have empty seats.

A good example might be if there is a sporting event on. A European Cup final in Barcelona for example, featuring an English team is going to see a MAN-BCN full off fans paying top rate, but the return flight might only be half full, unless you offer stupidly cheap fares. Might as well offer some of those empty seats for £25 and you might get someone in that seat paying something.
 
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Veigar
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Re: How does United make money on airfares less than $100?

Fri Jul 05, 2019 8:11 am

LAS-LAX consistently has fares below $50. SY actually does $39 I believe... it's crazy.
 
LH658
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Re: How does United make money on airfares less than $100?

Fri Jul 05, 2019 8:34 am

They also make up a little money in baggage fees to, on board food/drink sales.
 
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FabDiva
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Re: How does United make money on airfares less than $100?

Fri Jul 05, 2019 8:38 am

A lot of the time "Taxes" are used to cover a lot of sins because passengers don't check what they actually are. I've had a few £1 "Fare" and about £60 "Tax" fares - UK APD is £12, the rest is "Airline imposed charges"
 
Aptivaboy
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Re: How does United make money on airfares less than $100?

Fri Jul 05, 2019 5:20 pm

They're making money other ways that help to subsidize the super low fares. An airline may charge for upgrades, seat selections, extra bags, etc. The fare may say one thing, but the airline will find plenty of other ways to make buck and increase revenue and I'm sure United is doing the same.

There was a CNBC Presents hour long show on the CNBC network some years ago on AA. They followed a full JFK-LAX 767 flight and then told the audience what the airline made on the flight - just $200. This was a few years ago, and all of the birds were wearing that GORGEOUS bare metal livery, but still... I guess any profit is good profit!

https://www.youtube.com/watch?v=y9A1bYVUuSA
 
afcjets
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Re: How does United make money on airfares less than $100?

Fri Jul 05, 2019 5:43 pm

United is making more money off of them than American and Delta, who do not charge or prohibit carry-on baggage for passengers who purchase Basic Economy fares. A more important question is why would any passenger flying on the lowest fare choose United over American or Delta?
 
afcjets
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Re: How does United make money on airfares less than $100?

Fri Jul 05, 2019 5:46 pm

Aptivaboy wrote:


Too bad it was after the Luxury Liner interiors were ripped out though.
 
jetmatt777
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Re: How does United make money on airfares less than $100?

Fri Jul 05, 2019 7:45 pm

afcjets wrote:
United is making more money off of them than American and Delta, who do not charge or prohibit carry-on baggage for passengers who purchase Basic Economy fares. A more important question is why would any passenger flying on the lowest fare choose United over American or Delta?


If you’re going for a quick weekend trip and just need a backpack it’s more of a question of why would you choose F9 or NK over UA? UA is competing with F9 and NK with Basic Economy. UA competes with DL and AA with regular economy and first.
Lighten up while you still can, don't even try to understand, just find a place to make your stand and take it easy
 
KFTG
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Re: How does United make money on airfares less than $100?

Fri Jul 05, 2019 7:53 pm

To trick you into paying fees.
 
MIflyer12
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Re: How does United make money on airfares less than $100?

Sat Jul 06, 2019 1:38 am

FabDiva wrote:
A lot of the time "Taxes" are used to cover a lot of sins because passengers don't check what they actually are. I've had a few £1 "Fare" and about £60 "Tax" fares - UK APD is £12, the rest is "Airline imposed charges"


Maybe that's the way it works in the UK but it's not how it works in the U.S.A. Advertised fares must include all mandatory taxes and fees (since 2012). There are only two categories:

1. Fare (inclusive of carrier surcharges).
2. Government taxes and fees.
 
Aliqiout
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Re: How does United make money on airfares less than $100?

Sat Jul 06, 2019 5:27 am

MIflyer12 wrote:
FabDiva wrote:
A lot of the time "Taxes" are used to cover a lot of sins because passengers don't check what they actually are. I've had a few £1 "Fare" and about £60 "Tax" fares - UK APD is £12, the rest is "Airline imposed charges"


Maybe that's the way it works in the UK but it's not how it works in the U.S.A. Advertised fares must include all mandatory taxes and fees (since 2012). There are only two categories:

1. Fare (inclusive of carrier surcharges).
2. Government taxes and fees.

No, you pay the advertised fare in Europe too. What the original comment was about was mileage earning and/or redemptions. The airlines break out the cost minus government imposed taxes and fees into a "fare" and "fees". Everyrhing is included in the advertised cost, but the distinction between fare and fees effects mileage earning and redemption.
 
bennett123
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Re: How do Airlines make money on airfares less than $100?

Sat Jul 06, 2019 8:42 am

I am flying from BRS to NOC in September.

£36.50 run.

As I am only going for a few days I will just take a small bag.

I normally take pictures from the plane, however not much of interest at BRS. At NOC, you walk to the plane.

Click Click.
 
flyjay123
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Re: How do Airlines make money on airfares less than $100?

Sat Jul 06, 2019 9:10 am

Last December I payed £10 for a 5 hour ryanair flight brussels - Ovda. The 6 hour return from Aqaba to London with easyjet was just £20.
 
afcjets
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Re: How does United make money on airfares less than $100?

Sat Jul 06, 2019 9:18 am

jetmatt777 wrote:
UA is competing with F9 and NK with Basic Economy. UA competes with DL and AA with regular economy and first.


UA offers Basic Economy system wide in the US, not just markets where they compete with NK and FL. AA and DL also offer both Basic and regular economy fares and complete with UA for both.
 
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RWA380
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Re: How does United make money on airfares less than $100?

Sat Jul 06, 2019 9:44 am

Veigar wrote:
LAS-LAX consistently has fares below $50. SY actually does $39 I believe... it's crazy.


This may be one of those markets where the fares are, where they were back in the 90's.

I've paid $10 to fly Island Air JHM-OGG,
$12 to fly Western PDX-SEA,
$18 to fly American EUG-PDX
$20 to fly Sierra Pacific SEA-PDX,
$23 to fly CO SAN-ONT
PDX-SEA-PDX flights at under $25 incl ... AA, BN, BF, FL, HA, NW, OC, US, UA, WC.

I don't know how many of y'all were in the industry in the early 90's & AA decided to cut EVERY domestic fare in half for a 2-3 days, in minutes all the others matched I got a r/t on TW PDX-SEA-PDX for $33, r/t on AA to EYW from PDX for $153.00 & AS PDX-EWR-PDX for $188.

There are still amazing deals one-way, all over the world. Right now we are planning a worldwide trip & we are buying one-way tickets where r/t is more & I can save thousands off the published RTW fares.
707, 717, 720, 727-1/2, 737-1/2/3/4/5/7/8/9, 747-1/2/3, 757, 767-2/3/4, 777-2/3, DC8, DC9, MD80/2/7/8, D10-1/3/4, M11, L10-2/5, A300/310/319/320
AA AC AQ BD BN CO CS DL EA EZ HA HG HP KL KN MP MW NK NW OZ PA PS QX RC RH RW SA TG TW UA US VS WA WN WP YS 8M
 
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PacoMartin
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Re: How does United make money on airfares less than $100?

Sat Jul 06, 2019 9:50 am

PatrickZ80 wrote:
Indeed they don't make profit, but it reduces the losses. After all, it's the difference between selling that seat for a loss-making fare or not selling it at all. When the seat remains unsold the airline has 100% loss. When they manage to sell it they can reduce that loss to maybe 40%.


A hotel, in theory, loses money on an empty room, but in reality if they try for too high of an occupancy rate every single day they will cheapen their brand. The people who pay top dollar will see their neighbors showing up with portable coolers full of beer and decide that hotel is not worth the money they paid on the next trip.

But economy seating on a plane does not carry the same kind of "prestige factor". Some passengers are just helping to cover fuel costs. Most passengers understand that they are probably not paying the same money as the person in the seat next to them. But it is now an accepted part of the economy that there are dozens of fares for each flight.

Southwest statistics
Average length of passenger haul (miles) 981
Average aircraft stage length (miles) 751
Average passenger fare $ 151.61
Probably one trip in four involves more than one stage length and requires changing jets.

With Southwest it is fairly easy to know if you are paying more or less than the average.
 
ewt340
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Re: How do Airlines make money on airfares less than $100?

Sat Jul 06, 2019 10:48 am

A more profitable routes would subsidized those $100 airfares.

Also in that flight, for many full service airlines, premium cabin like Business class, premium economy/economy + would bring in extra revenue.

Those $100 airfares tend to be the breakeven number for them.
 
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PatrickZ80
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Re: How does United make money on airfares less than $100?

Sat Jul 06, 2019 11:10 am

Aliqiout wrote:
No, you pay the advertised fare in Europe too. What the original comment was about was mileage earning and/or redemptions. The airlines break out the cost minus government imposed taxes and fees into a "fare" and "fees". Everyrhing is included in the advertised cost, but the distinction between fare and fees effects mileage earning and redemption.


That is, if there is any mileage program. Most European LCCs like Ryanair and Wizzair don't have any mileage program, they don't care how often you fly them.

With traditional airlines, in fact every flight is a few euros more expensive than it actually is. Those few euros are put into your savings and you can use those savings to book future flights. Ryanair doesn't do this. Instead of putting that money into your savings for future flights, they just make the flight a few euros cheaper to get you on board but you don't earn anything. As a result of this, miles are much more of a thing in America than they are in Europe. Sure the European FSCs got savings programs as well, but in general Europeans don't really look at them. It's the fare that counts and anything that can bring the fare down is a good thing. Of course there are exceptions, there are people who think differently. This is just in general.
 
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PacoMartin
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Re: How do Airlines make money on airfares less than $100?

Sat Jul 06, 2019 11:32 am

Allegiant Air flies from my local airport to Orlando FL (Sanford Airport) 882 miles each way
Round trip is $84.09
Segment Fees: $8.40
Fed Tax: $6.31
PFC: $8.50
9/11 Security: $11.20
Carrier Usage Charge: $36.00

The Carrier Usage Charge is one of the stupidest. You can get out of it by paying cash, but the only place where you can pay it is in Florida and only for about 6 hours per week. They won't accept at the airport that you leave from. But then you pay to check your bag, to select a seat, to print a boarding pass,to use a credit card, to get insurance if you are going to make any miniscule change to your itinerary (including moving the flight by a day), to get a bottle of water, and on and on.

Allegiant cuts costs by prohibiting transfers. Your total flight is the same as your stage length.
 
Aliqiout
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Re: How does United make money on airfares less than $100?

Sat Jul 06, 2019 2:03 pm

PatrickZ80 wrote:
Aliqiout wrote:
No, you pay the advertised fare in Europe too. What the original comment was about was mileage earning and/or redemptions. The airlines break out the cost minus government imposed taxes and fees into a "fare" and "fees". Everyrhing is included in the advertised cost, but the distinction between fare and fees effects mileage earning and redemption.


That is, if there is any mileage program. Most European LCCs like Ryanair and Wizzair don't have any mileage program, they don't care how often you fly them.

With traditional airlines, in fact every flight is a few euros more expensive than it actually is. Those few euros are put into your savings and you can use those savings to book future flights. Ryanair doesn't do this. Instead of putting that money into your savings for future flights, they just make the flight a few euros cheaper to get you on board but you don't earn anything. As a result of this, miles are much more of a thing in America than they are in Europe. Sure the European FSCs got savings programs as well, but in general Europeans don't really look at them. It's the fare that counts and anything that can bring the fare down is a good thing. Of course there are exceptions, there are people who think differently. This is just in general.

But the LCCs that don't have milage programs don't use those fees.....
 
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PatrickZ80
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Re: How do Airlines make money on airfares less than $100?

Sat Jul 06, 2019 2:32 pm

PacoMartin wrote:
But then you pay to check your bag, to select a seat, to print a boarding pass,to use a credit card, to get insurance if you are going to make any miniscule change to your itinerary (including moving the flight by a day), to get a bottle of water, and on and on.

Allegiant cuts costs by prohibiting transfers. Your total flight is the same as your stage length.


Indeed you pay to check your bag, but you don't need to. You can travel without a checked bag for free.

You pay to select a seat, but you don't need to. You can get one randomly assigned to you for free.

You pay to have a boarding card printed for you at the airport, but you don't need to. You can check-in online for free and print your own boarding card. You can even use your phone as a digital boarding card, doesn't cost anything.

You pay for making a change to your itinerary, but you don't need to. You should just make sure you enter the correct info upon booking. Of course you pay for moving the flight by a day which is very logical. You were expected on a certain flight, they kept a seat free for you on that flight. The pricing progress of that flight was based on the fact that you would be taking that flight and not another one.

You pay for a bottle of water, but you don't need to. You're not obliged to buy it, you could go without water for the length of the flight or you could bring your own water on board.

So the only additional costs on top of the ticket price that you need to make are credit card costs. In Europe, such costs are prohibited since there's no way of escaping them. Airlines are only allowed to charge for optional extras, and as you saw anything other than credit card costs are optional. You can go without if you want to. Before credit card costs were prohibited in Europe, most European LCCs had them too.

Just like Allegiant, most European LCCs also don't offer connections. For a long time Ryanair didn't offer connections, only recently they started offering them at a small selection of airports and basically they're arranged self-transfers. The ticket price is just the price of the two flights added up, no discount. In such, Allegiant is perhaps the most European of all American LCCs.
 
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PacoMartin
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Re: How do Airlines make money on airfares less than $100?

Sat Jul 06, 2019 2:58 pm

PatrickZ80 wrote:
So the only additional costs on top of the ticket price that you need to make are credit card costs.

Actually you don't have to pay if you use a debit card.

I don't mean to sound like I am complaining, but I was just listing ways in which the airline makes up for the $84 round trip price, which was the subject of the thread.

Without Allegiant we would have only flights to ORD, DTW, PHL, CLT and ATL and they would all be expensive. Allegiant brings us an additional 7 airports that are popular leisure destinations.
 
ihmcallister
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Re: How do Airlines make money on airfares less than $100?

Sat Jul 06, 2019 3:04 pm

sonicruiser wrote:
I was surprised during several recent bookings at just how cheap airfares have gotten over the years. I am not talking about ULCC's like Spirit or Frontier which have always been cheap. I am specifically talking about United as it stands out as the only legacy I have seen that has consistently shown prices less than $100. How are they making any money on these flights? $100 almost seems too cheap to make a profit on a route, could it just be to guard against ULCC's luring pax away?


Cheapest I ever did . . . Ryanair, when they opened Aberdeen - Liverpool in the UK. As a promo I got a 1p fare, yes £0.01, one penny, plus no tax. As UK domestic departure tax at the time was £10, O'Leary paid £9.99 to have me sit in that seat!
 
afcjets
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Re: How do Airlines make money on airfares less than $100?

Sat Jul 06, 2019 9:01 pm

ewt340 wrote:
A more profitable routes would subsidized those $100 airfares.

Also in that flight, for many full service airlines, premium cabin like Business class, premium economy/economy + would bring in extra revenue.

Those $100 airfares tend to be the breakeven number for them.



If the lowest airfare is ever the breakeven point for a US3 airline like United, it is purely coincidental, and most likely they would be way below breakeven if the LDF was 100% and everyone paid that fare in Y, including ancillary revenue. Those extremely low airfares are either in response to ULCC competition or to send a message to another US3 they don't like what they have done in their hub. (For example if AA didn't like DL's CLT-LAX fare of $289, they might publish $189 or $89 ATL-LAX, DL would get the message, fix it, and AA would remove the fare. These fares are sometimes called mistakes, but they are totally intentional)

Not only do revenue management departments limit these fares, on many flights they are not offered at all, so even profitable routes will have these ridiculously low airfares, but you will likely only find them on an off-peak day or time, even if you booked on the first day seats became available for sale.

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