Cost to airline to fly me
Thread Starter
Cost to airline to fly me
I've looked at a recent article which includes estimates of Cost-per-available-seat-kilometre (CASK) figures for some LCCs in Europe.
https://www.gridpoint.consulting/blo...-european-lccs
I know this is back-of-the-envelope stuff, but if I take the distance in miles between 2 airports, multiply by 1.624 to get kilometres, multiply by between 0.04 and 0.07, and divide by 1.13 to go from euros to pounds, I regularly seem to get a number far higher than the base fare. Even allowing for maybe 40 euros per person each way in ancillaries, this still shows a lot of flights being sold under the cost price. Yes, there are all kinds of other things to take into account, but the apparent costs-are-more-than-revenues aspect seems puzzling.
An example is London to Cyprus being offered for under £20 in January. Offering this on just 1 date might be to allow marketing to make big claims... but doing this on many dates seems surprising
What am I missing ?
https://www.gridpoint.consulting/blo...-european-lccs
I know this is back-of-the-envelope stuff, but if I take the distance in miles between 2 airports, multiply by 1.624 to get kilometres, multiply by between 0.04 and 0.07, and divide by 1.13 to go from euros to pounds, I regularly seem to get a number far higher than the base fare. Even allowing for maybe 40 euros per person each way in ancillaries, this still shows a lot of flights being sold under the cost price. Yes, there are all kinds of other things to take into account, but the apparent costs-are-more-than-revenues aspect seems puzzling.
An example is London to Cyprus being offered for under £20 in January. Offering this on just 1 date might be to allow marketing to make big claims... but doing this on many dates seems surprising
What am I missing ?
Last edited by davidjohnson6; 11th Jan 2023 at 13:28.
The black arts of airline pricing.....who knows, perhaps only the developers of the algorithm that does the deed. There are so many variables, whether the route carries regular cargo, one route supporting another as a loss-leader, trying to establish a presence, tax write-downs, aircraft needing to be positioned for a profitable leg and on and on.
Without considering too many of the other indirect cost factors suggested above, there are quite enough potential direct cost variables that a simple distance x 4p or 7p /seat mile is far too simplistic.
Any airline's cost for any particular flight needs to take account of large variations in landing fees, parking fees, handling charges, fuel costs, airport's other charges, en-route and navigation charges and the cost of the aeroplane (is it a brand new 787 or a fully paid off 25 year 737 dog) given the aforementioned black-art algorithm means that on any given flight the first few seats will be at a loss (to quote in the advertising) and the last few at a very healthy profit.
I don't know the answer either, but it's not anywhere near as simple as you suggest.
Any airline's cost for any particular flight needs to take account of large variations in landing fees, parking fees, handling charges, fuel costs, airport's other charges, en-route and navigation charges and the cost of the aeroplane (is it a brand new 787 or a fully paid off 25 year 737 dog) given the aforementioned black-art algorithm means that on any given flight the first few seats will be at a loss (to quote in the advertising) and the last few at a very healthy profit.
I don't know the answer either, but it's not anywhere near as simple as you suggest.
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I remember to have taken flights for "2 Eurocents" within Europe. Cologne-Paris IIRC.
I remember to have taken flights for "2 Eurocents" within Europe. Cologne-Paris IIRC.
The cost for the airline must be higher but a company like Ryanair can make a profit at what they charge (plus extras like luggage, drinks and food and maybe the odd airport incentive). So around 50 to 60 Euros per segment might be the breakeven, given a low cost carrier cost base?
What is the marginal cost of carrying the passenger? APD, airport charges (probbaly not high for many Ryanair airports) and additional fuel, etc. For a train or a coach the marginal cost will be next to zero. I think that MoL once talked about charging next to nothing for the flight and making money on anciliaries.
The only relationship between cost and price is the profit margin, otherwise they're independent beasts.
You'll sell some seats at marginal revenue ie. lower than full cost if you weren't planning on filling the aircraft with higher paying punters. There's nothing more perishable than an aircraft seat and some carriers will even ignore the marginal revenue aspect to generate cashflow
You'll sell some seats at marginal revenue ie. lower than full cost if you weren't planning on filling the aircraft with higher paying punters. There's nothing more perishable than an aircraft seat and some carriers will even ignore the marginal revenue aspect to generate cashflow
Paxing All Over The World
Outside of airlines, I have seen corporates throw away the price list and undercut the competition in the hope that, in the long term, those clients will come back to them. In my life this has appeared to be a SOP for large companies who can afford the short term loss.
But prices are like chewing gum - once they're stuck to the floor, it's difficult to get them off again - you've just told the market what your pain point is and established a floor.
You'd use predatory pricing to increase or protect market share or to drive a new entrant back into its cave. There was a period of Wild West-like activity in the european cargo market after the departure from the IATA TACT pricing strictures and while state-owned carriers ruled the roost, the only KPI being loadfactor.
Here's an article about how James Daunt (eponymous - and superb - bookshop in Marylebone High Street) turned around Waterstones and Barnes and Noble. He started by stopping the "Buy 2, get one free" offers, reasoning that it devalued the product.
Same applies to aviation
https://tedgioia.substack.com/p/what...=pocket_reader
You'd use predatory pricing to increase or protect market share or to drive a new entrant back into its cave. There was a period of Wild West-like activity in the european cargo market after the departure from the IATA TACT pricing strictures and while state-owned carriers ruled the roost, the only KPI being loadfactor.
Here's an article about how James Daunt (eponymous - and superb - bookshop in Marylebone High Street) turned around Waterstones and Barnes and Noble. He started by stopping the "Buy 2, get one free" offers, reasoning that it devalued the product.
Same applies to aviation
https://tedgioia.substack.com/p/what...=pocket_reader
