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Cost to airline to fly me

Old 11th Jan 2023, 12:55
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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 ?

Last edited by davidjohnson6; 11th Jan 2023 at 13:28.
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Old 11th Jan 2023, 13:25
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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.
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Old 11th Jan 2023, 13:31
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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.
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Old 11th Jan 2023, 13:44
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Is there such a thing as a "base fare" where LCCs are concerned ?
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Old 12th Jan 2023, 08:52
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Originally Posted by DaveReidUK View Post
Is there such a thing as a "base fare" where LCCs are concerned ?
Its the absolute lowest price one person will pay - after that the seat is wasted
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Old 12th Jan 2023, 08:56
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I remember to have taken flights for "2 Eurocents" within Europe. Cologne-Paris IIRC.
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Old 12th Jan 2023, 13:31
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I remember to have taken flights for "2 Eurocents" within Europe. Cologne-Paris IIRC.
I can't remotely beat that! Back in the noughties, before APT reared it's horrible head, I took loads of impromptu day trips or weekends to varying destinations for between 5-20 euro all in. Hapag-Lloyd(HLX), Tui, EasyJet, even Ryanair to go to some ex-mil airfield in the middle of no-where, but close to my chosen destination. Even legacy carriers seemed to be doing it on short/medium haul routes. It couldn't last for ever and sadly for those of us who appreciate a good deal, it didn't. The most impressive aspect was just how long some of these companies were willing to operate routes at such low fares.
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Old 12th Jan 2023, 13:38
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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?
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Old 12th Jan 2023, 14:51
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Originally Posted by Asturias56 View Post
Its the absolute lowest price one person will pay - after that the seat is wasted
That's not how the OP was using the term, though.
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Old 13th Jan 2023, 17:55
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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.
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Old 13th Jan 2023, 22:03
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Originally Posted by Peter47 View Post
What is the marginal cost of carrying the passenger?
A forum search will find several threads on that very topic, which comes up regularly.
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Old 14th Jan 2023, 03:08
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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
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Old 14th Jan 2023, 16:40
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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.
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Old 15th Jan 2023, 01:10
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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
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