How Budget Airlines Like Ryanair Make Money

The low-cost business model was first implemented by Pacific Southwest Airlines in 1949 and perfected by Southwest Airlines in the early 1970s. It’s since expanded around the world.

In the U.S. popular low-cost carriers include Spirit Airlines, Allegiant and Frontier, among others. Budget airlines in Europe include EasyJet, Ryanair and Wizz Air, while Asia is served by players such as AirAsia and IndiGo. Some of South America’s low budget airlines include JetSmart, GOL and Wingo.

One way that these airlines keep costs down is by limiting their amenities to the bare minimum. Think no internet or seatback entertainment. They tend to entice travelers with low base fares and then charge for add-ons such as seat selection, food and luggage, all of which will frequently add up to more than the fare itself.

To find out more about how budget airlines work and why airlines in Europe are able to offer even cheaper fares than their U.S. counterparts, CNBC decided to try out Europe’s largest low cost airline: Ryanair.

Chapters:
1:58 Business model
5:29 Flying Ryanair
11:58 Future of budget airlines

Produced, Shot and Edited by: Magdalena Petrova
Additional Camera and Narration: Erin Black
Supervising Producer: Jeniece Pettitt
Editorial Support: Leslie Josephs
Additional Footage: Getty Images

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How Budget Airlines Like Ryanair Make Money