A £20 plane ticket seems to defy economics — the fuel alone must cost more than that. Yet budget airlines are among the most profitable in the industry. Their secret is not magic but ruthless operational discipline on the cost side and a second, quieter business on the revenue side: selling you everything the ticket doesn’t include.

The pioneers: doing less, deliberately

Cheap flying was pioneered by Southwest Airlines in the United States. Founded in 1971, Southwest discarded complimentary meals, free drinks and assigned seating, offering passengers low fares instead of frills; in 1994 it introduced ticketless travel. Today it is the largest US airline by domestic passengers carried and one of the world’s most profitable. Ryanair modelled itself along the same lines and became Europe’s largest budget airline.

The philosophy is unbundling: the ticket buys you a seat and nothing else. Everything beyond that — baggage, food, seat choice, priority boarding — is a separate product with a separate price.

How they crush costs

The low-cost carrier (LCC) model attacks costs on every front. Most budget airlines fly a single aircraft type — often just one variant of the Boeing 737 or Airbus A320 family. One fleet means one set of pilot certifications, one maintenance programme and one pool of spare parts, which slashes training and upkeep costs.

They fly point-to-point rather than through hubs: direct flights between cities, with no expensive connecting infrastructure. They use secondary airports with lower landing fees, turn aircraft around in as little as 25 minutes — an idle plane earns nothing — and pack in more seats per aircraft by trimming legroom. They sell directly through their own websites, avoiding travel-agent commissions, and keep staffing lean with flexible rosters.

High aircraft utilisation is the multiplier: a plane that flies 12 hours a day spreads its fixed costs over far more seats than one flying eight. Every one of these choices is individually small; together they create a cost base that legacy carriers struggle to match.

The real business: ancillary revenue

But cheap costs alone don’t explain the profits — the revenue model does. Ancillary revenue, the industry’s term for everything sold beyond the ticket, has become the cornerstone of budget aviation. Checked baggage, seat selection, priority boarding, in-flight food and Wi-Fi, travel insurance, car hire, hotels and credit-card partnerships can account for a staggering share of income: 30 to 50 per cent of total revenue at ultra-low-cost carriers, according to industry analyses. Ryanair reported ancillaries above 30 per cent of revenue as far back as 2019; US ultra-low-cost carriers such as Spirit and Frontier have been reported at 40 to 50 per cent.

Globally, the business is enormous: airlines earned roughly $148 billion in ancillary revenue in 2024, according to industry reports — a figure that has roughly tripled as a share of airline income over the past decade. The economics favour it because the cost of operating the flight is already covered by ticket sales; each extra pound a passenger spends on a bag or a sandwich falls almost directly to the bottom line.

Legacy carriers have copied the playbook. Basic economy fares on major airlines now come with strict change rules and stripped-back inclusions, nudging passengers toward paid extras — and some carriers now earn more from seat-selection fees than from baggage charges.

Are they safe?

The obvious question: does cheaper mean less safe? No. Budget airlines operate under the same safety regulations and certification standards as full-service carriers; their savings come from operational efficiency, not from cutting corners on maintenance or crew training. Safety oversight is set by regulators, not by ticket price.

The trade-offs for travellers

The model’s weakness is transparency. A headline fare can double once baggage, seats and food are added — the “drip pricing” regulators in several countries have begun to scrutinise. Secondary airports may be far from the city they claim to serve. And when things go wrong, lean staffing means fewer people to rebook you.

The rational response is to price the whole trip, not the ticket: add the extras you’ll actually buy before comparing fares, check baggage allowances carefully, and weigh the airport’s distance against the saving. The budget airline’s business model depends on passengers who compare only the headline price — the informed traveller compares the total.

FAQs

How do budget airlines make money with such cheap tickets?

Through extreme cost discipline (single aircraft type, point-to-point routes, fast turnarounds) plus ancillary revenue — baggage fees, seat selection, food and partnerships — which can make up 30 to 50 per cent of an ultra-low-cost carrier’s income.

Who invented the budget airline model?

Southwest Airlines pioneered it in the US from 1971, stripping out frills to offer low fares; Ryanair adapted the model for Europe.

Are low-cost airlines safe?

Yes. They meet the same regulatory safety standards as traditional airlines; their savings come from operational efficiency, not reduced safety.

Why do the extras cost so much?

Because they are the profit engine. Once the flight’s operating cost is covered by ticket sales, ancillary spending falls almost directly to the bottom line — which is why airlines design fares to nudge you toward add-ons.

Compiled by the Khabar 24h Editorial Desk from publicly available sources.