The Profitable Strategy of Offering Cheap Airline Tickets

Noah Silverbrook

Updated Wednesday, April 24, 2024 at 6:07 PM CDT

The Profitable Strategy of Offering Cheap Airline Tickets

The Revenue Potential of Optional Extras

Airlines often offer super cheap tickets to fill up empty seats on a plane. However, the sale of optional extras, such as baggage fees, in-flight WiFi, seat selection, and snacks, can be a significant revenue source for airlines. By enticing passengers with low-cost tickets, airlines have the opportunity to generate additional income through these extras. This strategy allows them to maximize their revenue potential while still offering affordable fares to passengers.

Basic Economy Tickets and Revenue Generation

To compete with ultra-low-cost airlines, some carriers have introduced low-cost basic economy tickets. These tickets are priced lower than traditional fares but come with restrictions, such as limited baggage allowance and no seat selection. By offering these tickets, airlines can attract price-sensitive passengers while generating revenue from other parts of the travel experience. For example, passengers may choose to purchase additional baggage allowance or select their seats for an extra fee.

Fuel Consumption and Passenger Weight

The cost for airlines to operate a flight is relatively the same whether the plane is completely full or has only a few passengers. The fuel consumption of a Boeing 737-800, for instance, is approximately 850 US gallons (3,200 L) per hour. While the weight of an individual passenger contributes to the overall fuel consumption of the flight, the impact is relatively minimal. Therefore, selling tickets at a discounted price allows airlines to fill more seats and generate revenue from additional amenities and services purchased by passengers.

The Economics of Cheap Tickets

Even with the added cost of fuel and other expenses, airlines can still make a profit from offering cheap tickets. In Europe, it is possible to find flights for as low as $30. By making at least $1 more than they spend on fuel, airlines can contribute to fixed costs like pilot salaries. It is more beneficial for airlines to make 20% of a ticket cost than to earn nothing from an empty seat. Therefore, offering cheap tickets helps airlines attract price-sensitive passengers and compete in the market.

The Importance of Filling Seats

Airlines aim to maximize their revenue by filling as many seats as possible, even if it means offering cheap tickets. The base fare for a cheap ticket may be sold at a loss or close to cost, but the additional revenue from extras can offset this. Passengers who purchase cheap tickets may still spend money on in-flight amenities, further contributing to the airline's revenue. The goal of airlines is to cover their costs and make a profit, and offering cheap tickets is one strategy to achieve this.

Airlines understand the profitability of offering cheap tickets. By filling up empty seats, they have the opportunity to generate additional revenue through the sale of optional extras. While fuel consumption and other expenses may increase with more passengers, airlines can still make a profit by attracting price-sensitive travelers. The goal is to maximize revenue by filling as many seats as possible, even if it means offering tickets at a discounted price. By doing so, airlines can cover their costs, make a profit, and provide affordable travel options to passengers.

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