How Do No-Frills Airlines Make Their Money?

Britain’s short haul budget airline Monarch has crashed into bankruptcy with estimated debts of up to £250 million, which begs the question of just how do discount airlines make money?

Some passengers flying between European destinations pay just £35 or so for their seats and established airlines are pulled into the bloodbath to compete for passengers by slashing the costs of fares otherwise that will not survive.

Before the budget airlines, flying was expensive, but if you consider the pricing structure of a no-frills flight, the fare is less of a bargain.

Add-ons are the price killer – checking bags, carrying on luggage, reserving seats and paying for food.

In the end, every budget airline traveller has the same flight experience. The seats, service and facilities are the same, but some people are prepared to pay more for easier access, such as fast-track through boarding and to reserve their seats.

Other rip-off fees include a 2% to 3% top-up for paying by credit card which the British government is banning from January 2018.

Cutting costs

And if you do not print your own boarding pass and check-in online, there’s another fee for admin charged by Wizz Air (£23.50) and Ryanair (£45).

Checking baggage in a hold adds another £40 each way on a flight.

Web sites will not list the charges until the booking process is complete, so comparing the costs of a flight up-front is almost impossible.

Besides fees, cost-cutting is where budget airlines try to save cash. They drive down prices of fuel, ground charges and their head offices and thrash their aircraft will short turnaround times of 30 minutes or less to squeeze more flights per day out of them.

But this war of attrition eventually has nowhere to go. Costs can only reach a certain level and ticket prices must remain competitive.

The class system

That’s where Monarch crashed and burned as a small airline.

Where budget airlines lose is the class system.

While short haul no-frills flights are all one class, long-haul operators have economy, premium, business and first-class passengers.

The way seats are sold, the profits come from business and first-class passengers as the cost of a seat can run to thousands of pounds.

On a carrier like British Airways, the 48 or so business class passengers will make the airline more money than 200 economy travellers on the same flight.

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