Airline passengers will search high and low for cheap plane tickets. After Southwest Airlines launched in the early 1970s, several low-cost airlines emerged in Europe. Legacy airlines in the United States and abroad also experimented with low-cost alternatives, with mixed results. Today, by eliminating meal service on most domestic flights and adding on various fees to the price of a ticket, including baggage fees, it's often difficult to distinguish legacy airlines from their low-cost cousins.
History of Budget Airlines
Flying used to be high-priced, luxurious experience with full-meal service and other amenities. Passengers dressed up to fly. Although the change was already in progress by the time Herb Kellner launched no-frills Southwest Airlines, the success of the low-cost airline accelerated the transformation of air travel. Southwest set the budget bar high, or perhaps low, by cutting all but the essential service of transporting passengers from point A to point B. The airline eliminated paper tickets, meal service and even assigned seats, instead seating passenger in a modified first-come, first-come service based on the time they check into the airport.
Ryanair was founded in 1985 with a single route between Waterford, Ireland, and London. The following year the airline added a Dublin-to-London route at the eye-popping fare of £95, less than half the standard £209 British Airways or Aer Lingus charged. The airline grew rapidly, but also developed a serious budget deficit. After reorganizing itself along the more financially successful Southwest Airlines model, Ryanair became profitable and in 2000 the airline reached its goal of serving 7 million passengers annually.
Cutting Costs By Dropping Amenities
Like all industries, airlines must operate at a profit to remain in business for the long term. As fares dropped, legacy airlines sought different methods to cut costs in order to maintain a profit margin. Amenities like meal service were the first to go. Budget airlines, however, began toy feature some amenities like leather seats, which they believed would make the flying experience more pleasant without adding great expense. Others such as Jet Blue have attempted to position themselves as providing superior customer service while offering budget fares.
Unlike many legacy airlines, budget airlines usually make the investment necessary to purchase and maintain newer planes. This upfront expense allows budget airlines to reduce the expenditure necessary to keep older planes fit to fly. Not skimping on maintenance was a lesson tragically learned by ValuJet, whose existence as an airline ceased after a deadly crash in Florida was revealed as having been caused by faulty maintenance.
Cutting Costs by Limiting Routes
Budget airlines also limit themselves to relatively short, heavily traveled routes to maximize passenger volume. They also frequently fly in and out of secondary airports. For example, Southwest Airlines serves Midway Airport in Chicago, but not the more congested and much larger O'Hare International. This practice allows budget airlines to achieve faster turnaround times, which also helps them to maintain profits. This practice is especially popular in Europe, which is compact enough so even short routes allow airlines to offer a variety of international destinations, some of which serve tourist destinations such as Budapest and Prague.
Cutting Costs By Adding Fees
Although legacy airlines in the United States have received much of the bad press for introducing the practice of charging for checked baggage for domestic flights, they did not invent the policy. Ryanair has been charging for checked luggage for years. Other European airlines had very restrictive luggage allowances, with hefty fees for overweight or excessive baggage. For budget airlines which do offer food, it is always at a price, making meals another revenue source, rather than a profit drain. Budget airlines also encourage passengers to arrange their own bookings and make reservations online.
Legacy Budget Airlines
The success of budget airlines did not escape the notice of legacy airlines. Several major airlines added low-cost branches, hoping to trade on the name recognition of their parent airlines while offering lower fares. These efforts have met with mixed results. The budget airlines Ted, introduced by United, and Song, launched by Delta, both folded within a few years of their introduction. Overseas legacy budget airlines launched have included BabyBmi, owned by British Midland Airlines; Jetstar, operated by Quantas and Tiger Airways, launched by Singapore Airlines, which is legendary in the airline industry for its customer service.
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