Cost to airline to fly me
Thread Starter
Joined: Sep 2008
Posts: 5,691
Likes: 24
From: Blighty
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 January 2023 at 13:28.
Joined: Jan 2008
Posts: 3,155
Likes: 112
From: There and here
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.
Joined: Apr 2002
Aviation Qualifications: PPL
Posts: 1,264
Likes: 57
From: Surrey, UK ;
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.
Joined: Oct 2018
Aviation Qualifications: PPL
Posts: 12,221
Likes: 1,649
From: Ferrara
Joined: Jan 2008
Posts: 3,155
Likes: 112
From: There and here
I remember to have taken flights for "2 Eurocents" within Europe. Cologne-Paris IIRC.
Joined: Feb 2010
Posts: 1,762
Likes: 385
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?
Joined: Sep 2007
Posts: 602
Likes: 6
From: London
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.
Joined: Jan 2002
Posts: 796
Likes: 4
From: Back of beyond
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
Joined: May 2001
Posts: 10,842
Likes: 328
From: Hertfordshire, UK.
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.
Joined: Jan 2002
Posts: 796
Likes: 4
From: Back of beyond
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
Joined: Oct 2019
Posts: 7
Likes: 0
From: Romania
Joined: Oct 2018
Aviation Qualifications: PPL
Posts: 12,221
Likes: 1,649
From: Ferrara
