How can Budget Airlines offer such low fares?

Airline policies, business systems and attitudes differ from company to company, but they all share one thing - cost minimalisation.

Easyjet's logo.
Take Easyjet. It's also the most webbed airline in the world in percentage terms of total bookings made on line. Why? Because all their planes are plastered with "Easyjet.com" in big letters on their fuselage, just to ensure you can remember the address. If you book online, you get a discount. They do have a call centre, but to have one of those, you need call center technology, a lot of lines from BT, and some low paid poor student to sit there getting bored taking your bookings all day. If the passenger books online, they do the booking, and it enters into your systems with no data entry costs to yourself. Take my word for it, those data entry costs are significant. When it comes to web bookings Easyjet is the airline to beat - of its total sales, on average 90% will be online.

Ryanair's logo.
In Europe, Ryanair is known for using airports that can be some distance from the city they serve. A classic example is Frankfurt Hahn, 60 miles west of Frankfurt itself. But these airports are much cheaper than the "normal" airports. European budget airlines don't use Heathrow because it's crowded. This means turnaround times can't be guaranteed and airport costs are high. Indeed, a landing slot at peak time can change hands for up to $6 million. If you grow at a smaller airport, you can end up being the dominant carrier at these airports, securing further discounts and the like. Easyjet is the dominant carrier at Luton, Ryanair has its own terminal in Dublin and so on and so forth. Incidentally, Easyjet is now the second biggest airline at Gatwick!

No more need for these things then.
The ticketless idea as introduced by the grandaddy of em all (Southwest) means that they save money on printing tickets. And if you fly several million passengers a year, that's a lot of printing ink. Boarding passes is another one - some airlines use laminated cards, which they'll take off you on entering the plane to be recycled for the next flight behind you.

Many of these airlines don't use travel agents or if they do, they airline doesn't get a cut. Go into your local travel agent in the high street, and the price they quote is the same as what you'll get, no matter how many people they generate for the airline. Going direct to the airline via their website or call centre means you don't have to pay unnecessary commission costs.

There's no longer such a thing as a free lunch, even when you fly. Some airlines cling on to tradition and give you a token packet of disguised nut type things. But if it's less than 5 hours, lets face it, you ought to have fed yourself. No free food means no catering. No catering means no food costs. Bringing your own is the new thing (I have been known to clamber on an Easyjet flight clutching a McDonalds to eat en route)! Besides, the food weighs a hell of a lot, and that means you have to transport it, and that's unnecessary fuel.

Using your own handling services is not one that will come to mind for the average passenger. But why pay a third party contractor if it's cheaper to do yourself!

Get free marketing, ring up ITV and get em to do a fly on the wall documentary about yourself, warts and all. Easyjet did, some of the episodes got over 7m viewers!

Money Money Money, feels so funny, it's a pricy business, this airline game.
Fly cheap to run aircraft. Or if you're buzz, don't. There are many ways to do this. It will come as no surprise to anyone that a jumbo uses more fuel than a little 737 would. But there are different 737's out there. Boeing's latest version is the 800 series, which can be spotted because it has little winglets at the end of the wings. These winglets cause a major difference to fuel burn rates. I've no idea why. When fuel is low, then is a good time to hedge. Hedging means preordering the fuel at a set price. If the general market rate goes down - tough. If it goes up - lucky you. It's a bit like a fixed rate mortgage. Ryanair successfully hedged their fuel in 2004 until at least October, so whilst the other airlines were getting hit by massive rises in fuel, Ryanair didn't have to pass on fuel costs. If you get it right, as Ryanair have here, you save tens of millions of dollars, and that's before you start worrying about exchange rates - all fuel is paid for in US dollars.

Don't fly long haul. Leave that to the established boys. Nobody wants to be cramped for that long a flight, and it reduces your exposure to unknowns (such as the tragic events of September 11th).

But don't cheat on maintenance. If you do, you're asking for trouble. Planes are like cars. If you look after them, they keep on going. If you don't, problems could occur. An example of this is the Valujet crash in Florida, which spelt the end of the airline. They had to buy and reverse into airtran to stay alive. For the record, this crash was due to the plane carrying oxygen-generating canisters which had been improperly handled and labeled by SabreTech Corp., the maintenance contractor for ValuJet.

Of course, it should be pointed out that airlines have to meet minimum requirements in all Western countries. Most budget airlines far exceed these requirements. Many of them have extremely young fleets (if it's new it doesn't break as often), which they often use as a PR marketing campaign. A young fleet would be under 15 years old. The leading budget airlines' fleets are invariably under 5 years old. You can also make it cheaper by only having one type of plane. Southwest and Ryanair only fly 737's. Easyjet fly A320's and 737's. British Airways fly dozens of different types of planes. This means that they have to carry more parts which ties up money that you can't do something else with, and you have to spend more on training maintenance crews.

With a bit of luck and effort on cost reduction, you'll get something like this.