It was interesting reading the recent letter regarding the disparity in cost for travelling long distance and getting to and from Shetland (Being held hostage; SN, 22/02/17).
It’s a frequently visited topic of discussion, and rightly so, but it also highlights a lot of misunderstanding about why we pay what we do for air travel. I am in no way praising the cost of getting to and fro, but would like to try to explain some of the ‘why.’
‘The airline must be raking it in with these prices. Why don’t they make it a flat £50 a ticket and then the planes would be full all the time?’
The idea that there is some fat-cat executive with a cigar clenched between grinning teeth, throwing wads of fifties in the air every time a Saab lifts off from Sumburgh is probably a little bit wide of the mark.
Let’s look at the economics of it. A Saab 340 is probably in the region of £2,000 an hour to operate, a useful figure as Aberdeen – Sumburgh is about an hour (I don’t have an exact figure but if anybody does I’d be interested to know).
This includes aircraft mortgage, insurance, fuel, maintenance, salaries, landing fees and navigation charges. Divide that by 34 seats and it comes in just under £60 per seat.
Arguably a reasonable price, but no airline is ever going to price their tickets so that the absolute best they can do is break even. That would mean that as soon as they have one empty seat, they are losing money.
Hardly a sound business model, especially as many flights leave with far less than full seats. This is why there is a tiered ticket system, just like practically every other airline, with a higher ticket price as the flight fills up.
Would every flight really be full if it was cheaper? People generally don’t fly for the sake of it, usually because they have to.
The Ryanair argument: ‘ Why don’t Ryanair fly here?’
Michael O’Leary, Ryanair’s CEO, is an extremely shrewd businessman who has opened up Europe to low cost air travel. This works because they fly between high population areas using regional airports which Ryanair have negotiated brutal terms in which to operate, with the constant threat of withdrawal if their conditions are challenged.
It works for the passengers because even if you land 100 miles, or in some cases in a different country, from where you ultimately want to be, if you can do it for a tenner then it makes it financially worthwhile.
Why do you think Mr O’Leary has overlooked starting a service to Shetland? There simply isn’t a large enough passenger catchment, and the runway is too short for a fully laden 737. Like an Austin Allegro on a damp day, it would be a total non-starter.
Also most people realise that Ryanair are only cheap at the point of buying a ticket. You pay extra for everything else, like each checked in bag is £20. So if a family of 4 were doing a return trip with Ryanair then they would pay £160 just for their bags!
‘Why can I fly to [insert far away country here] cheaper than to Shetland?’
It’s simple numbers. Take UK – America as an example: Every day dozens of airlines are flying hundreds of flights between areas with millions of people.
There is sufficient demand for deals and special offers, as well as the ubiquitous tiered pricing system. It should also be said that medium and long haul airlines don’t make their money off economy tickets, they make it off first/business/club class and cargo.
That’s why they can offer a ticket for £300 return; the cost of the aircraft is already covered by the real money making tickets.
This is why the gentleman from Canada was able to fly from Edmonton to Aberdeen for £420 return, but quoted so much more for the Aberdeen – Sumburgh leg. (Which included a return taxi to Lerwick; that must’ve been the best part of £100 on its own! The bus is about £6 return.)
‘There’s no competition. If there was that would make the tickets cheaper.’
No, it probably wouldn’t. There’s a reason there’s no competition – there isn’t the demand for two airlines on the route. If there was, there would most likely be a short-lived price war until one of them either withdrew their service or went bust. The remaining one could then charge what they wanted.
What about the low numbered flights? Instead of having one plane with eight passengers you would have two with four each….
Bigger planes could make it different; the ATR 72 that was up a few weeks ago can carry twice the load of the Saab 340 for about 50 per cent more fuel, so it is potentially more cost effective, but only if it has decent passenger numbers on it.
The bottom line is that an airline exists for one reason – to make money. The only way we could ever have ‘Ryanair prices’ to Shetland is if the government stepped in and gave a huge subsidy for an airline, but as tax payers we would ultimately be paying for that too, and no doubt everybody in the country would start demanding (more) subsidised transport too.
There is no magic fix, but I think the argument needs a bit of realism thrown in.
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