Nirmalya’s Blog

Tiger Airways is once again having a crazy promotion. This time to Phuket for less than SGD 10 (about USD 6). This was the same airline which previously offered tickets to Bangkok for SGD 1 way back in August/September last year. All this buzz about flying for less than 10-20 dollars, where regular airlines like Thai Airways [1] & Singapore Airlines [2], charge nearly 15 times the amount has me wondering as to how do budget airlines ever make any money? After searching on Google for a while, I came across this article. “Anatomy of a budget flight” [3]. Excerpts from the article..

The cost of a single flight
£542: Groundhandling charges
£817: Airport charges
£101: Credit card charges
£728: Administration
£614: Fuel
£420: Navigation
£215: Advertising
£676: Cost of the aircraft
£251: Tax
£643: Crew salaries and training
£584: Maintenance and servicing

How it adds up
Ticket sales: £6,136
Outgoings: £5,591
Profit: £545

A mere £545 (or SGD 1668 at today’s exchange rates) doesn’t sound like a lot, right? Here’s how they (claim to) actually make money. Excerpts from a quote made by an EasyJet staff [4],

..The way we make money is by offering very cheap fares for, say, 10 per cent of the seats, and then we practise the black art of what budget airlines call yield management…’The fuller the plane gets, the higher the prices rise. We might sell 10 per cent of tickets at rock bottom, 10 per cent somewhere near those of big-name, high-fare rivals, and the rest in between. By carefully adjusting prices, we make sure that our planes are, on average, 90 per cent full.’..

Ok.. so this makes some sense about why a Singapore to India return ticket costs just the same (at times higher) as a return ticket from Singapore to New Zealand. Almost all flights to India (for those who’ve flown on this sector at any time during the year might agree) are almost fully booked. No wonder, this route is the most profitable for the likes of SQ.