How Low Cost Carriers Make Huge Profits?

Most of us if not all have always wondered how some airlines make huge profits in spite of the low cost of their flight tickets. Well, wonder no more.

Such type of carriers is known as Low-Cost Carriers. For example, Ryanair in Europe, Southwest Airlines in the US, Indigo Airlines in India, etc.

So, what exactly is the business model for such an airline company?

(1) It buys all their aircraft of the same type. So, it does not have to spend more resources on the training of pilots, flight attendants, maintenance and service crew. And most importantly, it can get a good deal while placing a big order from a single aircraft manufacturing company.

(2) Generally, planes are on lease. So, it instantly makes a profit from the difference between purchase and lease. Because planes are bought in huge numbers, discount comes into play. And then these planes are sold to leasing companies at a higher price and taken back on lease to operate.

(3) It operates from a smaller airport rather than the main city airport to avoid high landing fees and all other charges. Apart from that, these small airports have low traffic so the airline company can strike a deal to operate there with minimal fees.

(4) It follows Point To Point Model instead of Hub And Spoke Model (which is followed by big airlines like Emirates, Qatar, Etihad, Lufthansa).

(5) Jetbridges are not used if possible. Something like this is more preferable to avoid its fees.

(6) There is an extra charge for every extra thing apart from a normal seat. That includes onboard food, extra leg space, extra baggage, you name it. Ryanair even sells lottery tickers while flying. Even advertisements are shown inside and outside of the aircraft body.

(7) Some airlines like Ryanair asks you to print your own boarding ticket from your home and if you forget it charges you high fine. While some airlines use kiosks to print them. These eventually cut down employee count.

(8) Optimum employee count is managed. From maintenance to the flight crew. Sometimes, flight attendants work at the boarding gate.

(9) Low-cost carrier makes sure to fly their aircraft for maximum time in the air. So, more trips, and more revenue, and more profits. Generally, it is about 12 hours for such airlines. Turn around time between landing and next take off is kept the minimum.

(10) Average age of aircraft is low. So more efficient technology is used to reduce fuel expenses.

(11) No longues at airports are built.

(12) No frequent flyer programs, miles, or cards exist.

(13) Company overbooks the seats using complex algorithms from past data of flyers. So, rarely there are empty seats on an airplane.

(14) Some airline companies hedge their fuel components by investing in their Futures and Options.

(15) High charges are levied upon flyer for change in date or any other data of scheduled flight.