Colegate’s mention of the Ryanair yields highlights a curiosity inherent in the lo-co business model. Conventionally, breakeven load factor is calculated by dividing cost per unit of capacity by yield (revenue per unit of traffic). Ryanair’s comes out at a healthy – I guess, 60% or so?
But paradoxically, an FR flight that is only 60% full will probably be losing money quite heavily, because most of the pax have paid fares that don’t cover the cost of flying them. It’s only when you get to the higher fare levels that the real money starts to be made.
With an 81% average load factor in May you can bet there were a lot of flights with punters on board paying top whack, which for FR is normally between €150-200 one way. If they lose those passengers, the model looks very shaky.
In the last year, Ryanair have abandoned 14 routes. If you consider that the FR model is supposed to work ‘anywhere’, that’s a hell of a lot. Pick one at random – say, Stansted-Ostend. Who’s going to pay €129.99 or €169.99 (plus taxes) for that? Sure, you can fill up the aircraft with €39.99 ‘where shall we go today?’ punters but they won’t pay the bills.