The impact of Corona Virus on the low cost airlines
I’ve watched a very interesting short documentary about how low cost airlines work, and how they manage to offer a similar service to traditional flight companies for a lower price. I already knew that the strategy were offering basic service (only stairs to board), and selling things on board, but some other strategies are actually very smart, already existing in other type of businesses.
Smart plane purchase
Low cost airlines buy planes in bunches, getting big discounts. Ryanair once bought 151 planes at once. Having the same plane model also makes it easier to train the staff, that only needs to know how one specific plane operates. They also avoid using reclining seats (they break often) and seat pockets (faster to clean). Planes are also upgraded often, as new ones consume less fuel.
Smart airport choice
They tend to use small airports, and become the major companies operating, in order to have more negotiating power and minimise the fees they have to pay.
Smart services offered
No flight connections, too complicated and expensive to operate. Multiple plane routes per day to maximise the plance usage. And opening new routes, so finding new customers that can visit original new locations.
Revenue model and the impact of Corona Virus
This is obvious, we were all bombarded with announcements for tickets, food, drinks. But I was surprised to know that on a £40 average flight ticket, £13 are spent on food and drinks by the average customer. Given the cost of the flight of £22 fuel and £22 for staff and amortised plane cost, low cost companies make only £6 revenue per flight. But with a large customer scale, that makes Ryanair making profit of 24%, EasyJet and Wizzair around 10%.
Based on CNN, the recent impact of Corona virus might hit those airlines like in 2008, if not worse, having some flight companies losing a fifth of their business or — worse — going bankrupt.
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