Bank Holiday Traffic

The days of car-loads of holidaymakers heading for the coast are numbered. At nearly £1 a litre for petrol, a trip to Skeggy can cost more than the car itself is worth, but more significantly, people now just jet off abroad. Over the Easter weekend I went off to Krakow – a trip which only cost me around £40 on EasyJet. Ignoring other running costs, that would have got me about halfway to Scotland in the car.

Discount air travel has revolutionised leisure time in the twenty-first century. Rather than limiting English binge-drinking culture to the UK, we can now export such a fine tradition to the beautiful cities of Prague or Barcelona. When the first jets landed, the locals must have been thinking “Great, English tourists we can welcome to our lovely city!” How disgusted they must have been. I visited Bratislava 6 months before EasyJet started flying there – what a truly welcoming set of people. I wonder what they think now…

The big question is though, how can the airlines do it? How can flights be so cheap and, sometimes, free? Don’t they have to pay for the plane and the fuel? Basically they fund themselves through three methods:

Cost Cutting

Michael O'Leary, Chief Executive of Ryan Air has stated that he wants the airline to be the Wal-Mart of the travel world. Any costs that can be cut are, down to fine details. For example the pockets were removed from seat backs to save fuel (just how heavy are they?) and cleaning time. By charging per checked bag, the airline has managed to cut fuel and handling costs (this is not a money-making scheme though as the charge levied is passed on in reduced ticket prices – it just encourages passengers to bring less). The obvious concern about cost cutting is how far it goes – when I’m in a plane I’m not too bothered if they’ve saved money on baggage handling, as long as it’s not on servicing or safety.

The second key area of cost savings was learned from the USA’s Southwest Airlines in flying from smaller regional airports where landing fees are less. Originally Ryan Air received money from certain cities to land there in order to boost tourism, but this has ceased.

Flexible Ticket Prices

Everyone knows that ticket prices change on flights, but the scale can be quite surprising. A one-way ticket from East Midlands Airport to Dublin in 2 days time (a Sunday) would cost £119.99. The same flight in a month’s time (still a Sunday) would cost £14.99. For a flight in 3 months time that again drops to just £7.99 – a fifteenth of the price, and that is in peak holiday time as well.

Other Revenues

Ryan Air made over 15% of its revenues from sources other than ticket sales in 2005 – it would be interesting to know what percentage of profit this represents. Some of the areas in which money is made are:

• Food and drink prices on board, while not exorbitant, are steep – probably equivalent to a motorway service station. Last year 27 million passengers bought in-flight refreshments on the airline last year, generating sales of $61 million, or an average of $2.25 per person.

• Fancy reserving your seat in advance on BMI Baby? That’ll be £3.50 please!

• Vodafone, Jaguar and Hertz have all paid to decorate the exterior of planes.

• 98% of Ryan Air’s ticket sales are through www.ryanair.com – advertising revenues on the website are a massive earner, including such areas as hire car bookings.

• Every booking on www.ryanair.com automatically selects the £4.50 travel insurance option – if you deselect it, it later suggests that Ryan Air “highly recommend” insurance – I bet they do!

• Want to pay by anything but Visa Electron or Visa Debit on www.bmibaby.com? For an extra £4.95 you’re welcome!

• In 2007 gambling will be introduced on planes, with Ryan Air taking a cut of each wager.

 It’s clear that bargain flights are here to stay. Ryan Air is the world’s most profitable carrier with a 22% margin. Their sales also grew in 2005 by 20%. British Airways, once the flagship of high-class flying are following the trend and it seems inconceivable that anyone but business travellers will stick with “traditional” carriers for short-haul flights.

How long before a trans-Atlantic flight for 99p?

Figures thanks to http://money.cnn.com/magazines/business2/business2_archive/2006/04/01/8372814/

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