MSG Team's other articles

12355 Are Increasing Housing Prices Good for the Economy?

The Drudge report is an economic news report run by conservative right-wing Republicans. They have claimed that the economy of America is growing well because the housing prices seem to be on an upward spiral once again. This problem is not new or recent. In the past couple of decades, housing prices have become the […]

9609 How Employment Rules and Tax Laws Affect Managers and Working Professionals

How Labor Laws and Employment Rules Impact Managers The nature of the employment rules and the governmental policies that regulate the working of companies in each country affect managers and working professionals in many ways. For instance, if the government adopts a strict policy governing hire and fire of workers and prohibits firing of workers […]

10826 Pros and Cons of Using Social Media for Recruitment and Monitoring Purposes

Social Media and Access to Personal Information With the advent of Social Media sites such as Facebook, Twitter, Instagram, and others, many people post so much personal information about themselves that anybody who can access their public profiles can get to know a lot about them. Indeed, with an estimated one Billion people on Facebook, […]

9670 How Should Inflation Be Measured?

In the previous few articles, a series of arguments has been made as to why the current way we use to measure inflation is not appropriate. A lot of the criticisms have received rebuttals from current economists. However, for a lot of criticisms, they do not have an answer at all. The usual reply received […]

9905 Why The Indian Real Estate Market Will Not Appreciate Any Longer?

The Indian real estate market has given one of the best returns for any investment class worldwide. However, these returns were only given in a particular period. The two decades from 1995 to 2015 was the time when literally everybody made money from real estate investments. However, since 2015, the market has been stagnant. There […]

Search with tags

  • No tags available.

Airlines are a tough cut-throat business. A large number of airlines across the world are making losses, and others are barely profitable. The business becomes even more challenging when it comes to low-cost airlines. There is very little margin for error. Only airlines which are extremely efficient in their operations can turn around a profit.

Big airline companies have failed to launch successful budget airlines. It seems to be a niche that only a handful of enterprises have mastered. Although there are a few successful low-cost airlines in Asia and America as well, for the most part, Europe is their home.

Ryan Air and Easy Jet from Europe are the top low-cost airlines in the world. They sell tickets for less than 100 euros on almost all their flights and still manage to make a decent profit. In this article, we will have a closer look at the economics of low-cost airlines.

  1. Standardization
  2. Low-cost airlines follow a high degree of uniformity. For instance, all the planes in Ryan Air’s fleet are Boeing 737. They are almost the same model. This is in contrast to larger airlines like KLM and Lufthansa which have different types of planes in their fleet.

    The advantage of having a single type of jet is that it is easier to train people how to use it. Right from pilots to cleaning staff, everyone in Ryan Air is used to working on the same type of planes. Hence, their training is easy.

    The employees can be used interchangeably across locations since they do not have different skills.

    Standardization helps employees move faster up the learning curve. With the passage of time, the crew becomes increasingly efficient. Companies like Ryan Air prefer to have their jets always in the air. They do not halt at all for anything except cleaning and servicing. Faster cleaning and servicing means the jet stays in the air for longer and makes more money for the company

    These planes also tend to have the same type of seats with minimum space. This allows the airlines to sell maximum tickets. There are no business class or first class seats available in low cost airlines. Some seats like aisle seats tend to have more leg room than the others. Low cost airlines sell these seats for a slight premium.

    The extent of standardization is such that budget airlines do not take connecting flights. This is because connecting flights require a different process for ticketing and baggage transfers. Since this would interfere with the airline's regular operations, such processes are simply avoided.

  3. Younger Fleet and Crew
  4. The common perception about low-cost airlines is that they use planes which are older and outdated to lower costs. That does not seem to be the case.

    All major low-cost carriers have younger fleets when compared to full-service airlines. This is because younger planes are technologically more advanced and therefore offer better fuel efficiency and other economic advantages.

    The cabin staff of the low-cost airlines also tends to be young and inexperienced. Budget airlines often train complete newcomers to perform the tasks. This allows them to employ people for a fraction of the cost that other airlines would.

    The staff is provided minimum safety training, and within a few weeks, they are ready to learn by experience while performing on the job!

  5. Cheaper Airports
  6. Budget airlines almost never fly out of the main airports. Airports like Heathrow and Charles De Gaul in Paris are expensive since they have a large number of flights coming in each day. Instead, these airlines have developed airports in nearby towns to these mega cities.

    Most of these airports are 80 to 100-minute bus ride away from the main city. However, since they are out of the city, they only receive traffic from budget airlines like Ryan Air and Easy Jet. As a result, these airlines have tremendous bargaining power over these airport authorities and personnel. They negotiate the cheapest possible rates and pass on the benefits to their consumers.

    Even if these airlines fly to the main airports in bigger cities, they tend to fly at unusual times. This allows them to minimize their costs under all circumstances.

  7. Automation
  8. Low-cost airlines rely heavily on automation to bring down the cost. They never provide physical ticket printouts to their customer. In fact, they charge the customers heavily in case such printouts are required. Also, the check in almost always done by machines.

    There is little to no ground staff that these airlines employ. Similarly, the baggage operations are simple and often mostly mechanized with the need for fewer workers. The rising minimum wage laws in Europe make automation an extremely viable option allowing airlines to heavily cut costs.

  9. Economies of Scale
  10. Budget airlines have to operate on a large scale. A successful budget airline by definition cannot run a smaller fleet. This is because to gain the lowest cost from suppliers, they need to have vast operations. A small airline has little to no bargaining power and is more likely to lose money than to make some.

To sum it up, budget airlines have a very different business model. This model requires a high degree of efficiency and precision to make money and cannot be easily emulated.

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles