budget airline travel - how they profit

If budget airlines sell tickets for less than $10 each (or even give away tickets), how do they make a profit? Only a certain amount (a small percentage) of tickets are sold at these ridiculously low prices. Combining this with the things that you should be wary of about budget air travel, it is very realistic that these budget airline travel operators will turn a profit.  After all, AirAsia is one of the most profitable airlines in the entire Asia region. This page considers why each of the things about budget airline travel that may annoy you, help budget airline operators turn a profit. Even though you are saving money, they are still making money.

Marketing

Whenever someone buys a cheap ticket, of course they will tell all their friends about it.  They will rave about how cheap their ticket is and the great price of the ticket.  To everyone else, this creates the thought that there are plenty of discounted tickets available and they too can buy that cheap flight. With budget airline travel operators expanding to provide long haul flights, people will keep on talking about the cheap flights they have bought. This word of mouth is a marketing dream for the budget airlines.

Low cost terminals and airports

Flying in/out of secondary airports largely reduces the costs for budget airlines as they do not have to pay as much for landing and take off fees. Secondary airports charge airlines far less than larger more central airports.  Some budget airlines have also taken steps to establish low cost carrier terminals close to major airports as an alternative to flying in/out of secondary airports. Generally, facilities aren't as plush. They fit the characteristics of budget airlines and budget travel. Don't expect a great range of duty free shops or food outlets.

Restrictions on transfers

Unless you pay prices which are similar to normal carriers, there will be many restrictions on your ability to change or transfer your ticket.  You may not be able to change dates or names. Due to the restrictions imposed, budget airlines may have a higher "no show" rate than its competitors. Since passengers have paid far less for their ticket and are restricted from altering their travel arrangements, passengers will be more inclined not to fly.  This allows budget airlines to overbook by a greater percentage.  It also allows them to earn revenue for more tickets where passengers decide not to take their flight.

Baggage allowances

Budget airlines generally have lower allowances for checked luggage compared to normal carriers.  Some airlines even have cheaper fares is you do not have any checked luggage. 

Of course, airlines will profit if you are required to pay extra to carry more luggage onto the plane.  But they also profit as fuel costs won’t be as high if the total luggage is lighter.

Check in times

Check in usually closes 45 minutes before scheduled departure.  Again, this means that more people will miss out on their flight or will choose not to take their flight because they won't make it in time.  This leads to more revenue for the budget airlines without having to actually fill a seat. This also allows for greater overbooking and increased ability to make profits.

No frills

With a budget airline travel operator, all that is included in your ticket price is a seat.  Paying extra for food and drink allows the airline to have a mark up on these goods.  It also allows the airline to cut back on catering costs behind the scenes.

Online bookings

Overheads are reduced significantly as there is less of a traditional booking system.  As most tickets are purchased on the internet, there is very little administration involved.  Plus, budget airlines charge extra for phone bookings and very rarely have bookings through travel agents.

There are many more factors which jafatravel.com could mention. Generally, anything that you will complain about with a budget airline is an aspect which allows them to reduce costs or increase revenue.

Read more about:

• why use budget airline
• things that you should be wary of about budget air travel

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