How Cheap Airlines Survive

How come cheap airlines are so cheap?



Fastest growing segment of air travel are low fare airlines (LFAs), sometimes called low cost companies (LLC). LFAs now constitute 35% of scheduled intra-EU point to point traffic - and the cheap flights revolution in Europe only started in 1990 by Ryanair. In the USA it was the Southwest Airlines that has led the attack against high flights prices since 1971.



Low cost airline Regular airline



So how cheap are the cheap flights? Aver far (E)



Ryanair Easyjet Aer Lyngus Southwest Lufthansa Air France British Airways



44 65 94 106,60* 235 267 324



RYANAIR easyJet Aer Lingus SOUTHWEST Lufthansa AIR FRANCE BRITISH AIRWAYS



Higher seat density - 737-300; 148 seats, single class cabin 128 seats in a regular one



Fast turnarounds (up to 25 min.) - higher utilization of the plane Turanround slowed down by use of major airports with large amount of traffic (approx. 45 min.)



Direct flights - point to point, no transfers, short routes Transfers, long hauls



Smaller airports - cheaper; simple ground facilities. Bigger airports - more expensive.



Tickets sold directly, mostly by Internet (easyJet - 95%). Many tickets sold by travel agencies, incurring extra charges



No Frills - no additional costs. Entertainment programme, quick check in, lounges, paper tickets, business class, catering.



Standardised fleet (only one aircraft type) - cheaper maintenance, training. Various Aircraft.



High variable-proportion of salary (up to 26%), better HR utilisation High basic salaries (variable proportion up to 11%), trade union affiliation



The case of extreme productivity

Passengers per employee :

Easyjet : 6772 British Airways : 735

Ryanair : 9679 Air France\KLM : 715



Where do all those savings, on average, come from?



16% 3% 3% 6% 2% 10% 6% 6% 3% 2% 43%



Higher seat density

Higher aircraft utilization

Lower crew costs

Cheaper airports / landing fees

Single aircraft type

Minimal station costs

No inflight catering

No agents commission

Reduced sales / reservation costs

Smaller administration

Total advantage How come cheap airlines are so cheap? Fastest growing segment of air travel are low fare airlines (LFAS), sometimes called low cost companies (LCC). LFAS now constitute 35% of scheduled intra-EU point to point traffic – and the cheap flights revolution in Europe only started in 1990 by Ryanair. In the USA it was the Southwest Airlines that has led the attack against high flights prices since 1971. Low cost airline Regular airline So how cheap are the cheap flights? Average fare (€) - Ryanair Easyjet Aer Lyngus Southwest Lufthansa Air France British Airways 44 65* 94 106,60* 235 267 324 ORYANAIR casyJet Aer Lingus e Lufthansa AIR FRANCE SOUTHWEST (") 2007 Higher seat density- 737-300: 148 seats, single class cabin 128 seats in a reqular one Fast turnarounds (up to 25 min.) - higher utilization of the plane Turnaround slowed down by use of major airports v traffic (approx. 45 min.) h large amount of Direct flights - point to point, no transfers, short routes Transfers, long hauls Smaller airports - cheaper; simple ground facilitie . Bigger airports - more expensive. Tickets sold directly, mostly by Internet (easylet- 95% ). Many tickets sold by travel agencies, incurring extra charges. Entertainment programme, EB quick check in, lounges, paper No Frills – no additional costs tickets, business class, catering. Standardised fleet (only one aircraft type) - cheaper maintanence, Various aircraft training. High variable-proportion of salary (up to 26 %), better HR utilisation O High basic salaries (variable proportion up to 11 %), trade union affiliation The case of extreme productivity Passengers per employee: Easyjet: 6772 British Airways: 735 Ryanair: 9679 Air France\KLM: 715 Where do all those savings, on an average, come from? 43% 16% 10% 6% 6% 6% 3% 2% Higher Higher Lower Cheaper Single Minimal No aircraft density utilization costs landingtype No agents Reduced Smaller Total seat crew airports / aircraft station inflight commission sales / adminis- advantage costs catering reservation tration fees costs Managing Airline Oper Movided by ELAA Presentation "Variations in Airport Charges, lan Skeels-Secretary General, Aviation industry Group -2nd Annual Data based on informationp www.SWgraphics.com Dtin 1 December 2005