I fly around Europe for €30-€100 per return flight without a checked bag. Yet Ryanair are one of the most profitable airlines in the world yet charging such cheap prices. Are other airlines just not as efficient as low cost airlines?
In: Economics
Low cost airlines rethought the entire airline industry.
In order to fully understand this, I think you need to grasp the history of the industry. When commercial flights emerged in the 50’s, it was a leisure activity as much as it was a mode of transportation. To board a flight was to take part of a modern marvel and get an experience very few people had had before! And it was expensive. Maybe not quite like visiting space, but only top earners could afford flying. And because of this clientele, the staff wore fancy uniforms, they served food and beverages, they took care of your luggage for you, etc.
In the 60’s and 70’s, incomes increased and airlines were able to cut costs somewhat due to increased competition and larger volumes. Flying certainly didn’t become a regular experience for average Joe, but it undoubtedly became more accessible. And the business benefits of airports and flying became apparent to many governments, many of which started their own state-run airlines to ensure their businessmen, politicians, etc could reach places like London, New York, Brussels and Frankfurt in a timely manner. But all these new airlines, state-run or not, more or less copied the business model of the first airlines, including the image of luxury and exlusivity.
In the 80’s and 90’s, a few entrepreneurs rethought that business model completely. The viewed flying as a mode of transport, in essence no different from taking a bus. So they started airlines that basically offered ”air buses”:
– they operated only the most economically viable airplanes
– they reduced staff and did away with fancy uniforms and cabin comfort
– they discouraged actions and behaviours that are unprofitable by slapping large fees on it, that sometimes even exceeded the ticket price. Stuff like bringing luggage, since handling luggage both takes time and costs money, not to mention that it’s easily lost and forces airlines to pay for extra transports.
– crucially, they often trafficked smaller airports where time slots are a lot cheaper. You might have to travel further to and from your flight, but it’ll still be a net gain for the traveler since the flight is that much cheaper.
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