Originally Posted by
GWU ESIA STUDENT
You are missing the point of their pricing structure; of course Skybus will lose money on $10 and possibly even $50 fares. They will make that money up with baggage fees, priority boarding fees and (most likely) the selling of any and everything possible at 30,000 feet. Money also gets made on the comissions they get from hotels, attractions, rental car reservations etc etc. NK down in FLL is using this exact same model which works very well for Ryanair.
Ryanair is a shopping system that happens to fly people. Most of their money is made off of selling incidentals that only happen when you buy the ticket.
Look at it like this. Assume you buy a ticket that Skybus breaks even on for the flight part of your trip. Then you check a bag for $5 and assume Skybus gets $4 profit, buy priority boarding $10, pure profit, buy a soda and snack for $4, Skybus gets $2 profit, book a hotel via their website $5 commission/profit, book a rental car via their website $5 commission/profit. These numbers can add up pretty quickly based on my example, assuming Skybus breaks even with the ticket they just made close to $26 profit from this passenger. Now assuming that thier fares average out to them breaking even across the whole plane on a flight and all of their passengers average about $26 in additional charges they made $3,744 on that flight. Not too shabby by any airlines standards.
Granted their are overhead costs and HQ staff has to be paid etc etc but that $3,744 across the whole system can add up pretty quickly.
Ancillary review will NEVER make up the gap here. What are they going to get -- $5 per pax for luggage? Faced with a charge, more folks will carry it on. And how many $2 cokes are you going to sell? My guess is one per pax. Priority boarding revenue will be near zero, as the cheapskates who book these fares aren't going to fork over another $10 to get a better seat. And biz travellers will be few and far between on SkyBus.
I know some of the European carriers make some money booking hotels on their websites, but the market for that in the US will be very small. It's a very mature market, and I see little reason to believe SkyBus pax will shift their hotel bookings to Skybus from the established players.