How Do Low Cost Airlines Make Money?

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Budget airlines, with no frills, no meals, and no drinks have reconceptualized the idea of flying.  Traveling has become such a standard thing, as was only a crazy expense awhile back. Now we are living in the age of cheap and short flights. But have you ever wondered how these airlines possibly still make a profit?

Now there are flights to romantic places such as Paris or Rome for 20 pounds. This is less than the cost of a train from within the United Kingdom to central London.  The most successful budget airline company is Ryanair, an Irish company which actually made a net income of 866.7M pounds in the year 2015. Although due to unique tax processes in Ireland, it is not quite clear how to work out exactly how they make their profits.

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To breakdown a budget airlines costs, it looks something similar to this. From ticket sales they make 6,136 pounds. They spend 5,591 pounds on outgoing purchases, and they are then left with a profit of 545 pounds.

The airport itself has charges that are paid per passenger. The cheapest airport in London in Stansted, followed by Luton. Budget airlines, will therefore, fly to these airports as a first cost-cutting measure.  When it comes to the aircraft, they take the Boeing 737, which takes 150 travelers and can operate on any route. It has the easiest maintenance and the stock is maximized.  Since there is only an economy class, the airline can fit in many more seats, as first-class seats usually take up a lot more room.  And furthermore, most aircraft’s are long-term leasehold arrangements with financing companies. They are now outrightly owned by private companies in comparison to regular airlines.

When it comes to the crew costs, there are certain standard wages that cannot be cut down on, especially since you need to have qualified pilots.  But for the general cabin crew, they do in fact earn a great deal less compared to other airlines. And furthermore, airlines such as Easyjet do not need as much staff on board since there is no first class section requiring top notch and attentive service.  It is also important to remember that they are not serving meals to each passenger.In terms of fuel, this is a factor that can change constantly in large amounts, especially so in world crises, such as war or currency crashes. Therefore this is something that can affect their low prices and overall profits.

Library filer of low-cost airline planes - Go, Ryanair, Buzz and easyJet - at Stansted Airport, January 31, 2003. Discount airline easyJet today saw shares tumble, Tuesday February 25, 2003, after revealing it had cut fares to encourage passengers on to its planes amid tougher economic conditions and increased competition. The group, which bought rival Go last May, said for the four months to January 31 its average fare was around 6% lower than the fare generated by the two airlines during the same period in 2001. See PA Story CITY EasyJet. PA Photo: Gareth Fuller

In terms of fuel, this is a factor that can change constantly in large amounts, especially so in world crises, such as war or currency crashes. Therefore this is something that can affect their low prices and overall profits.  The maintenance of the plane, are of course, the same as all airlines and needs to be checked in between each flight, as well as undergo a yearly engine test.The budget allocated for ground handling includes the cost of check-in staff, baggage handlers, as well as workers who need to refuel the plane, and are usually workers that are employed by an agency outside of the airline themselves.  There is no possible way to cut costs when it comes to navigation. Safety comes first and the budget airlines must consider the costs of air traffic controls within their pricing.  And of course the airline also pays a certain Tax percentage of the sale to the Treasury, however since the costs are slightly lower, the taxes are lower as well.

The budget allocated for ground handling includes the cost of check-in staff, baggage handlers, as well as workers who need to refuel the plane, and are usually workers that are employed by an agency outside of the airline themselves.  There is no possible way to cut costs when it comes to navigation. Safety comes first and the budget airlines must consider the costs of air traffic controls within their pricing.  And of course the airline also pays a certain Tax percentage of the sale to the Treasury, however since the costs are slightly lower, the taxes are lower as well.

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A big cost of all airlines is advertising and getting their name and deals out there. Low-cost airlines rely greatly on newspaper, billboards and through public transport. These methods are much cheaper than advertising on TV, which can cost close to 80,000 pounds for a mere 30-second appearance! And lastly, budget airlines do most of their booking online, with an option do so by phone, however with an additional charge!

Wherever these airlines can cut down on, they do! However, they most certainly offer the same amount of security and will get you to your destination on time! And they still manage to profit while doing it!

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