How can airlines, particularly budget airlines such as Airasia can afford to give million of free seats but yet still make profit on such offer.
Here is how according to Chris Anderson in his book ‘Free: How Today’s Smartest Business Profit By Giving Something For Nothing‘.
AirAsia operates in a market identical to that of Ryanair in Europe.
In fact, the airlines actually replicate whatever Ryanair does successfully – and become the most profitable airlines in the country!
Every year, about 1.3 million passengers fly from London to Barcelona. A ticket on Dublin-based low-cost airline Ryanair is just US$20.
Other routes a similarly cheap, and Ryanair’s CEO has said he hopes one day offer all seats on his flights for free (perhaps offsets by in air-gambling, truning his planes into flying casinos).
How can a flight across the English Channel be cheaper than a cab ride to a hotel?
Cut costs. Ryanair boards and disembarks passengers from the tarmac to trim gate fees. The airline also negotitates lower access fees from less-popular airports eager for traffic.
Ramp up the ancilliary fees. Ryanair charges for in-flight food and beverages; assesses extra fees for preboaarding, checked baggage, and flying with an infant; collects a share of car rentals and hotels reservations booked through the Web site; charges marketers for in-flight advertising; and levies a credit card handling fee for all ticket purchases.
Offset losses with higher fares. On popular travel days the same flight can cost more than $100.