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How can one fly from Rome to Venice and Back for under 3 Euro? (Plus tax =40E) I understand the theory and the business model but booking it is a bit like going flying in a C150 and then getting on a Jumbo. They fly for the same reason but there has to be something wierd about it, doesn't there?
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Probably because those 3 euros are being paid by only the first 10-15% of the passengers who book that particular flight. As the seats on a flight are sold, they usually become more expensive. So, on that flight, maybe the last 10 passengers are paying 200 euros, for example. The technical term for this is 'yield management'.
Also, the theory is that a low-cost carrier makes some more money on each passenger on things like refreshments, car hire/hotel booking commissions and even in some cases local authority passenger fees at certain airports.
The other thing is that low-cost carriers are really just that - low-cost, not low-fare carriers. Their entire structure is based on lower costs, ie. small head offices, flat management, no interlining at hubs, internet booking/e-tickets, quick turn-arounds, more poorly paid staff, much lower (if any) health care and pensions commitments etc. etc.